Question

David borrowed $30,000 to start a business. Four years later he repaid $1260 in interest. What was the annual rate? Round to two decimal places.

Answer 1

Annual rate = 1.05%

Simple interest formula is I = Prt * 100
Where P is principle, I is interest, r is rate and t is time.

Transpose to make r the subject

Prt * 100 = I
r = I/ Pt * 100

Substitute values into the equation.
Let I = $1260, P = $30,000 and t = 4 years

r = $1260/ $30,000 * 4 * 100
r = 0.0105 * 100
r = 1.05%