Question

Philippa took out a $860 discounted loan for a period of m months and the simple interest rate was 6%. The amount that was actually disbursed into her bank account was $838.50. Calculate the effective interest rate of this loan, to the nearest 0.01%

Answer 1

The effective rate of interest is given by the same formula but with the disbursed amount which is $838.50.

What is simple interest?

Simple interest is the concept that is used in many companies such as banking, finance, automobile, and so on.

Philippa took out an $860 discounted loan for a period of m months and the simple interest rate was 6%. The amount that was actually disbursed into her bank account was $838.50.

Then the effective interest rate of this loan, to the nearest 0.01% will be

So, from the question the interest that is deducted = $860-$838.50 = $21.50

Now, I = Prt/100

So, t = 100 (I/Pr) = 0.42 years = 5months

therefore m = 5months

So, the effective rate of interest is given by the same formula but with the disbursed amount which is $838.50.

I = Prt/100

Therefore, r = 100 (I/Pt) = 6.15%

More about the simple interest link is given below.

https://brainly.com/question/2793278

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