Suppose that you borrow $3000.00 from a friend and promise to pay back $4230.00 in 2 years. What simple interest rate will you pay
To find the simple interest rate, we can use the formula:
Simple Interest = Principal * Interest Rate * Time
In this scenario, the principal (borrowed amount) is $3000.00, the interest rate is unknown, and the time is 2 years. The total amount to be paid back is $4230.00.
Let's substitute the values into the formula and solve for the interest rate:
$4230.00 = $3000.00 * Interest Rate * 2
Now, divide both sides of the equation by ($3000.00 * 2) to isolate the interest rate:
Interest Rate = $4230.00 / ($3000.00 * 2)
Interest Rate = $4230.00 / $6000.00
Interest Rate ≈ 0.705
Finally, multiply the result (0.705) by 100 to express it as a percentage:
Interest Rate ≈ 0.705 * 100
The simple interest rate you will pay is approximately 70.5%.