business math

Question

Miguel borrowed $1,800 for  2 years and ended up paying $180 in simple interest . What was the interest rate? a) 3% b)4.2% c)5% d)10%

Answer 1

the underlying simple interest formula that you want to use here is

I = PRT

solving that equation for "R" yields

R = I / PT

for this particular scenario then that becomes

R = 180 / 1800 *2

R = 0.05 = 5%

meaning that the interest rate on Miguel's loan was 5%

Answer 2

The formula for interest is Interest = Principal x Rate x Time

 

In this case, the Interest = $180, the Principal = $1800, and the Time = 2 years.

 

Inserting those values into the formula, we get

$180 = $1800 x Rate x 2yr

 

Solving for the Rate, we get Rate = [ $180 / ($1800 x 2)] x 100%

 

Thus, the Rate = 5%

 

So, the answer is option C