Question

John borrows 2500 from his dad who feels it is best to charge him interest. Six months later, John repays him dad the loan plus interest a total of 2588. What was the annual interest rate on the loan?

Answer 1

Answer:

7.04%.  

Step-by-step explanation:

We have been given that John borrows 2500 from his dad who feels it is best to charge him interest. Six months later, John repays him dad the loan plus interest a total of 2588.

To find the annual interest rate, we will use simple interest formula.

$A=P(1+rt)$, where,

A = Amount after t years,

P = Principal amount,

r = Annual interest rate,

t = Time in years.

Let us convert our given time in years.

1 year = 12 months

$\text{ 6 months}=\text{0.5 year}$

Upon substituting our given values in above formula, we will get:

$2588=2500(1+r*0.5)$

$2588=2500+1250r$

$2588-2500=2500-2500+1250r$

$88=1250r$

Switch sides:

$1250r=88$

$\frac{1250r}{1250}=\frac{88}{1250}$

$r=0.0704$

Now, we will convert our given rate in percentage by multiplying by 100.

$0.0704\times 100\%=7.04\%$

Therefore, the annual interest rate on the loan is 7.04%.

Answer 2

Answer:

6.92%

Step-by-step explanation:

Using the equation 2,588 = 2,500e0.5r

ON edmentum