Question

Suppose Mary receives an $8,000 loan from First National Bank. Mary repays $8,480 to First National Bank at the end of one year. Assuming the simple calculation of interest, the interest rate on Mary's loan was

Answer 1

6%

Step-by-step explanation:

In order to calculate the interest that Mary paid on her loan, we must first calculate the increased interest by dividing her total paid by the initial loan like so...

$8,480 / $8,000 = 1.06

This is the increased interest rate in decimal form. Now we must subtract by 1 and multiply by 100 to turn this into a percentage.

(1.06 - 1) / 100 = 6%

Now we see that the total interest rate that Mary paid on her loan was 6% which would sum up to be $480 on top of her initial loan.