Question

Help pls I'm so confused with this

Samira borrows 10,000 AED for an investment. She will pay a total of 16,400 after 7 years. Samira says the interest rate is less than 10%
Step 1: Calculate the interest amount she will pay in the 7 years
Step 2: Calculate the interest rate
Step 3: Is Samira correct? Explain

Answer 1

6400 AED

9.14%

yes. The interest rate is 9.14%. This is less than 10%

Explanation:

Interest amount she would pay = total of loan to be repaid - amount borrowed

16,400 - 10,000 = 6,400 AED

Interest = loan x interest rate x time

we have all the parameters of the above equation apart from the interest rate. We can thus determine the interest rate from the above equation

6,400 AED = 10,000 x interest rate x 7

6,400 AED = 70,000 x interest rate

Divide both sides by 70,000 to find a value for interest rate

interest rate = 0.091429 = 9.14%