Answer:
<u>The annual interest rate advertised by the bank is 2.67% or 0.22% per month.</u>
Step-by-step explanation:
Let's evaluate the information given:
Amount of the loan = US$ 750
Duration of the loan = 15 months
Net amount received by Timmy into his bank account = US$ 725
Interests for the loan = Amount of the loan - Net amount received into bank account
Interests for the loan = 750 - 725
Interests for the loan = US$ 25
Now for calculating the interest rate, we do this operation:
Interest rate = Interests for the loan / Amount of the loan
Interest rate = 25/750 = 1/30 = 0.033 * 100 = 3.3%
But let's remember that this is for the total duration of the loan, 15 months. For calculating the annual interest rate, we do the following operation:
Annual interest rate = Loan interest rate/15 * 12 (We use 12 because the year has 12 months)
Annual interest rate = (1/30) /15 * 12
Annual interest rate = (1/30) * 1/15 * 12 = 1/450 * 12 = 12/450 = 4/150 = 2/75 = 0.0267 * 100 = 2.67% (Rounding to two decimals)
<u>The annual interest rate advertised by the bank is 2.67% or 0.22% per month.</u>
