Thinking Mathematically (6th Edition)

Published by Pearson
ISBN 10: 0321867327
ISBN 13: 978-0-32186-732-2

Chapter 8 - Personal Finance - 8.3 Simple Interest - Exercise Set 8.3: 35

Answer

The annual interest rate is 640%

Work Step by Step

This is the formula we use when we make calculations with simple interest: $A = P~(1+rt)$ $A$ is the future value $P$ is the present value $r$ is the interest rate $t$ is the number of years We can find the annual interest rate $r$. $A = P~(1+rt)$ $rt = \frac{A}{P}-1$ $r = \frac{\frac{A}{P}-1}{t}$ $r = \frac{\frac{\$1472}{\$960}-1}{\frac{1}{12}}$ $r = 6.4 = 640\%$ The annual interest rate is 640%
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