Simple Interest Practice
Question 2
Calculate the interest rate of a $12000 loan
when it's simple interest after 5 years
is $3000.
Answer
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Step by Step Solution
Step 1
We can start with the simple interest formula:
Where:
Where:
- I is the interest ($3000)
- P is the principal ($12000)
- r is the interest rate per year (we will be calculating this)
- t is the loan duration in years (5 year).
Step 2
With I=3000, P=9000 and t=0.25, we can substitute these values into the formula as shown:
Step 3
Now we have, 60000r = 3000. To find r, we have to divide both sides of the equation with 60000. This is shown below:
Step 4
Hence, we have, r = 0.05. It is better to express 0.05 in percent. To do so, we multiply 0.05 with 100% as shown:
Step 5
The calculated interest rate is 5%. Clearly, the answer is D.
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