Question

A person collected $1,400 on a loan of $1,200 they made 7 years ago. If the person charged simple interest, what was the rate of interest?

Answer 1

The formula that we can apply in this case is the following:

`r\text{ = (}(1)/(t))((A)/(P)-1)`

now, solving we get:

`r\text{ = (}(1)/(7))((1400)/(1200)-1)=\text{ }0.02380952`

if we convert this amount into a percentage we get the final answer:

`0.02380952\text{ x 100\% = }2.381`

then, the correct answer is:

2.381% per year