Henry takes out a $650 discounted loan with a simple interest rate of 12% for a period of 7 months. What is the effective intere
1 answer:
The effective rate of interest will be 9.10 %.
<h3>What is compound interest?</h3>
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
R = 9.10%
Hence the effective rate of interest will be 9.10%.
For more information about compound interest,
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