Final answer:
To find the simple interest rate of a loan, calculate the total interest paid and use the formula for simple interest. In this case, the simple interest rate is found to be 3%.
Step-by-step explanation:
The question is asking to calculate the simple interest rate of a loan where the principal amount is $4,500 and the final amount owed after four years is $5,040. First, we need to find out the total interest paid over the four years by subtracting the principal from the final amount:
Total interest = Final amount - Principal
Total interest = $5,040 - $4,500
Total interest = $540
Then, using the formula for simple interest (Interest = Principal × rate × time), we can solve for the rate:
$540 = $4,500 × rate × 4 years
Dividing both sides by ($4,500 × 4) gives us:
rate = $540 / ($4,500 × 4)
rate = $540 / $18,000
rate = 0.03 or 3%
The simple interest rate on the loan is 3%.