Question

You borrow $18,000 to buy a new car. You will pay $3,240 in simple interest at the end of 6 years. What is the annual interest rate on your purchase? Use the formula: I = Prt.

Answer 1

The answer is:  " 3 % " .
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Explanation:
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Given:  I = Prt ; Solve for "r" ;
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Rearrange the equation; to isolate "r" on one side of the equation; then plug in our given values to solve for "r" ;
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               I = P r t ;
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Divide EACH SIDE of the equation by "P*t" (that is:  "(Pt)" ;
  to get:  "r" on one side of the equation ;
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        I / Pt  = (Prt) / (Pt) ;

to get:   I / Pt = r ;

↔  r = I / Pt  ;  

   GIven:  Interest = I = 3240 ;
                Principal  = P = 18000 ;
                time (in "years") = t = 6 ;
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Plug in our given values to solve for " r " ("rate") ;
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        r = I / (P t)  ;

  →  r =  3240 / (18000 * 6) ;

  →  r =  3240 / (108000) ;

  →  r = 3/100 = 0.03  =  3%
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     The answer is:  " 3% " .
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