Question

Suppose that you borrow $1000.00 from a friend and promise to pay back $1390.00 in 2 years. What simple interest rate will you pay?

The simple interest rate is % (Round to the nearest tenth as needed.)

Answer 1

19.5%

Explanation:

Simple Interest = Principal x Time x Rate in % / 100

SI = 1000 x 2 x a / 100

=> SI = 10 x 2 x a

=> SI = 20a

Total Amount = SI + Principal

=> 1390 = 20a + 1000

=> 1390 - 1000 = 20a +1000 - 1000

=> 390 = 20a

=> 390/20 = 20a/20

=> 19.5 = a

Let's recheck

=> 1000 x 2 x 19.5 /100

=> 10 x 2 x 19.5

=> 195 x 2

=> 390

1390 = 390 + 1000

=> 1390 = 1390

So, the interest rate is 19.5 %

Answer 2

19.5%

Explanation:

Use the formula I = prt, where I is the interest money, p is the starting amount of money, r is the interest rate, and t is the time that the money was borrowed.

Plug in the values and solve for r:

390 = (1000)(r)(2)

390 = 2000r

0.195 = r

r = 19.5%