Question

A man needed money to buy lawn equipment. He borrowed $700.00 for eight months and paid $53.97 in interest. What was the rate of interest?

Answer 1

To calculate the rate of interest, we use the equation:

$Interest\:paid=Amount\:borrowed\times Rate\:of\:interest\times Time$

Where we have

Interest paid = $53.97

Amount borrowed = $700

Time = 8 months = 8/12 (conversion factor: 1 year = 12 months)

Putting those values in the equation, we get:

$\begin{gathered} 53.97=700\times Rate\:of\:interest\times\frac{8}{12} \\ Rate\:of\:interest=0.11565=11.565\%\approx11.6\% \end{gathered}$

The rate of interest is 11.6%.