A vet Barro's $12,000 for four years. The total interest paid was $875. What was the interest rate on the loan?

Question

Bitsy

Mathematics

3 March, 10:37

A vet Barro's $12,000 for four years. The total interest paid was $875. What was the interest rate on the loan?

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Answers (1)

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Jason Byrd · Answer 1

R = 1.8229%/year

Equation:

r = (1/t) (A/P - 1)

Calculation:

Solving our equation:

r = (1/4) ((12875/12000) - 1) = 0.01822917

r = 0.01822917

Converting r decimal to R a percentage

R = 0.01822917 * 100 = 1.8229%/year

The interest rate required to get a total amount, principal plus interest, of $12,875.00 from simple interest on a principal of $12,000.00 over 4 years is 1.8229% per year.