Question

The maturity value of a 50-day loan of $550 is $560. What is the annual simple interest rate (in percent) on this loan? Round to the nearest tenth of a percent. Use 360 days in 1 year.

Answer 1

13.1%

Explanation:

Principal value of the loan = $550

Maturity Value of the loan = $560

Let the rate of simple interest = R

Time = 50 days =
`\[(50)/(360)\]` years

Simple Interest = Maturity Value - Principal Value = $560 - $550 = $10

But Simple Interest =
`\[(Principal * R * Time)/(100)\]`

Substituting,
`\[10 = (550 * R * 50/360)/(100)\]`

`\[=> R = (10*100*360)/(550*50)\]`

`\[=> R = 13.1%\]`