Question

Donna borrowed 300 from a bank for 4 years and was charged simple interest. The total interest that she paid was 84.00 what % was the annual interest rate of the loan

Answer 1

The annual interest rate of the loan was of 0.07 = 7%.

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E are the earnings, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

After t years, the total amount of money is:

`T = E + P`.

In this problem, we have that:

4 years, so
`t = 4`

Loan of 300, so
`P = 300`

Interest of 84, so
`E = 84`

We have to find I.

`E = P*I*t`

`84 = 300*I*4`

`I = (84)/(300*4)`

`I = 0.07`

The annual interest rate of the loan was of 0.07 = 7%.