Question

Laura borrowed $700 from a bank for 3 years and was charged simple interest. The total interest that she paid on the loan was $63. As a percentage, what was the annual interest rate of her loan?

Answer 1

The Solution.

By formula, simple interest is given as below:

$I=\frac{\text{PRT}}{100}$

In this case,

$\begin{gathered} I=\text{ \ 63} \\ P=\text{ \ 700} \\ T=3\text{years} \\ R=\text{?} \end{gathered}$

Substituting the above values in the formula, we get

$63=\frac{700\times R\times3}{100}$

Solving the above equation, we get

$\begin{gathered} 63=7\times R\times3 \\ 63=21R \end{gathered}$

Dividing both sides by 21, we get

$R=\frac{63}{21}=3\text{ \%}$

So, the interest rate is 3%.

Thus, the correct answer is 3%