Example Question - calculating interest rate
Here are examples of questions we've helped users solve.
Calculating Simple Interest
To determine simple interest, you can use the formula: \[ I = P \times r \times \frac{t}{T} \] Where: - \( I \) is the interest, - \( P \) is the principal amount, - \( r \) is the annual interest rate (as a decimal), - \( t \) is the amount of time the money is borrowed for, and - \( T \) is the total number of days in a year (360 days in this case as specified in the question). Here's what we have from the image: \( P = $575 \), \( r = 4.5\% = 0.045 \) (as a decimal), \( t = 60 \) days, \( T = 360 \) days. So we calculate the interest as follows: \[ I = 575 \times 0.045 \times \frac{60}{360} \] \[ I = 575 \times 0.045 \times \frac{1}{6} \] \[ I = 575 \times 0.0075 \] \[ I = 4.3125 \] Rounding to the nearest cent, the simple interest is $4.31.
Calculating Pawnbroker's Interest Rate
The image shows a word problem which reads: Joaquin pawns his favorite watch for a loan of $120. After 30 days, he buys his watch back for $140. What interest did the pawnbroker charge Joaquin? To solve this you would: 1. Calculate the total amount of interest charged by subtracting the initial loan amount from the amount paid to reclaim the watch: $140 - $120 = $20. 2. To find the percentage interest rate, you compare the interest charged to the initial loan amount using the formula: Interest Rate = (Interest Charged / Initial Loan Amount) × 100 3. Substitute the numbers in: Interest Rate = ($20 / $120) × 100 = 1/6 × 100 4. Calculate the final percentage: Interest Rate = 16.666... % Rounded to the nearest whole number, the pawnbroker charged Joaquin 17% interest.
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