Question

A man needed money to buy lawn equipment. He borrowed ​$700.00 for five months and paid ​$53.95 in interest. What was the rate of​ interest?

Answer 1

Answer: The rate of interest per year is 18.49 %.

Explanation:

To calculate the rate of interest, we use the equation:

$\text{Interest paid}=\text{Amount borrowed}\times \text{Rate of interest}\times \text{Time}$

where,

Interest paid = $ 53.95

Amount borrowed = $ 700

Rate of interest = ?

Time = 5 months = $\frac{5}{12}$    (Conversion factor: 1 yr = 12 months)

Putting values in above equation, we get:

$\ 53.95=\ 700\times \text{Rate of interest}\times \frac{5}{12}\\\\\text{Rate of interest}=0.1849\times 100=18.49\%$

Hence, the rate of interest per year is 18.49 %.