Question

The maturity value of a 30-day loan of $650 is $660. 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. (Enter a number.)

Answer 1

Answer: the interest rate is 18.7%

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the loan.

P represents the principal or amount taken as loan

R represents interest rate

T represents the duration of the loan in years.

From the information given,

P = 650

I = 660 - 650 = $10

T = 30 days. Converting to years,

T = 30/365 = 0.08219

10 = (650 × R × 0.08219)/100 = 0.5342R

R = 10/0.534 = 18.7% to the nearest tenth of a percent.