Question

Henry takes out a $650 discounted loan with a simple interest rate of 12% for a period of 7 months. What is the effective interest rate? Give your answer as a percentage to the nearest percent.

Answer 1

The effective rate of interest will be 9.10 %.

What is compound interest?

Compound interest is applicable when there will be a change in principle amount after the given time period.

Let's say you have given 100 for two years with a 10% rate of interest annually than for the second-year principle amount will become 110 instant of 100.

Given for simple interest

Principle amount = $650

Rate of interest = 12%

Time period = 7 months.

Interest= PRT/100

Interest= 650× 12 × 7/100 = 546

So final amount = 650 + 546 =  $1196

By compound interest

1196 = 650$[1 + R/100]^{7}$

R = 9.10%

Hence the effective rate of interest will be 9.10%.

For more information about compound interest,

brainly.com/question/26457073

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