Example Question - word problem solution

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.