Three years ago, Ava lent her sister $400 to buy some clothes. Today Ava’s sister paid her loan in full with $454. What simple annual interest rate did she pay?
((454-400)/400)/3*100 = 4.5%
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To find the simple annual interest rate, we can use the formula:
Interest = Principal * Rate * Time
In this case, the principal (amount lent) is $400. The interest received is $454 - $400 = $54. The time period is 3 (since it's three years).
So, we can rearrange the formula to find the rate:
Rate = Interest / (Principal * Time)
Rate = $54 / ($400 * 3) = $54 / $1200 = 0.045
To express it as a percentage, we multiply by 100:
Rate = 0.045 * 100 = 4.5%
Therefore, Ava's sister paid a simple annual interest rate of 4.5%.