Question

Delia made 10 payments of $108.50 to the credit union on a loan of $1000. How much interest did she pay? What was the simple interest rate charged by the credit union?

Answer 1

-Delia paid $85 in interest.

-The simple interest rate charged by the credit union is 0.85%.

Explanation:

To find the interest she paid, first you have to determine the total payment she made and subtract the principal from that amount:

$108.50*10=$1,085

$1,085-$1,000=$85

According to this, Delia paid $85 in interest.

Now, you have to use the following formula to find the simple interest rate charged by the credit union:

r=(1/t)*(A/P-1), where:

r=rate of interest

t=time period=10

A=accrued amount=1,085

P=principal amount=1,000

r=(1/10)*(1,085/1,000-1)

r=0.1*0.085

r=0.0085→0.85%

According to this, the simple interest rate charged by the credit union is 0.85%.