If James borrows $4,200 to pay his college tuition. He signs a 5 year simple interest loan. If monthly payments are $78.40, what

Question

3 years ago

12

is the interest rate on the loan?

1 answer:

Lapatulllka [165] · Answer 1 · 2022-05-04T16:25:35+03:00

0.024 /yr

Step-by-step explanation:

Without interest, the monthly repayment would be;

5 yrs = 12 months * 5 = 60 months

$4200 / 60

= $70

James, however, pays $78.40 monthly. The interest therefore is;

Jmaes pays a total of $78 * 60 = $4704 at the end of the 5 years. The formula for finding simple interest is;

A = P(1 + rt)

Where:

A = Total Accrued Amount (principal + interest)

P = Principal Amount

I = Interest Amount

r = Rate of Interest per year in decimal; r = R/100

R = Rate of Interest per year as a percent; R = r * 100

t = Time Period involved in months or years

4704 = 4200 (1 + 5r )

4704 = 4200 + 21000r

504 = 21000r

r = 504/21000

r = 0.024

Interest rate = 0.024 /yr

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