Suppose that you borrow $3000.00 from a friend and promise to pay back $5340.00 in 4 years. What simple interest rate will you pay
To calculate the simple interest rate, we can use the formula:
Simple Interest (SI) = Principal (P) * Rate (R) * Time (T)
Where:
SI = $5340.00 - $3000.00 = $2340.00 (interest earned)
P = $3000.00
T = 4 years
Now we can rearrange the formula to solve for the interest rate:
R = SI / (P * T)
R = $2340.00 / ($3000.00 * 4)
R = $2340.00 / $12000.00
R ≈ 0.195
Now, we multiply the interest rate by 100 to express it as a percentage:
R ≈ 0.195 * 100
R ≈ 19.5
Therefore, the simple interest rate you will pay is approximately 19.5%.