Suppose you borrow $2000.00 from a friend and promise to pay back $3560.00 in 4 years. What simple interest rate will you pay?
To calculate the simple interest rate, we can use the formula:
Simple Interest = Principal * Rate * Time
Where Principal is the amount borrowed, Rate is the interest rate, and Time is the time period.
In this case, the Principal is $2000.00, the Simple Interest is $3560.00 - $2000.00 = $1560.00, and the Time is 4 years. Let's substitute these values into the formula and solve for the Rate:
1560 = 2000 * Rate * 4
Divide both sides of the equation by 2000 * 4:
Rate = 1560 / (2000 * 4)
Rate = 0.0975
Therefore, the simple interest rate is 0.0975, or 9.75%.