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

Question

insens350 [35]

2 years ago

13

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

t is the interest rate on the loan?

Mathematics

1 answer:

UkoKoshka [18] · Answer 1 · 2022-02-21T22:54:52+03:00

The interest rate would be 2.4%.

We start out finding the total amount he pays, including interest.

78.40/month * 12 months * 5 years = $4704

We take off the amount of principal:
4704-4200 = 504

This is the amount of interest he pays. Now we use the simple interest formula, I=prt:

504=4200(r)(5)

Multiply 4200 and 5:
504=21000r

Divide both sides by 21000:
504/21000 = 21000r/21000
0.024 = r
2.4% = r