Question

3) Mason took out a $800 loan from the bank At the end of 5 years, he pays back a total of $920 What was the annual interest A) How mucho Mason pay in interest per year? Show your work Round to the nearest hundredths. 3) What was the annual interest rate?

Answer 1

Given :

Loan = $800

pay back = $920

Time = 5 years

Assume a simple interest

so,

$\begin{gathered} A=P+I \\ I=P\cdot r\cdot t \\ A=P(1+r\cdot t) \end{gathered}$$\begin{gathered} P=800 \\ A=920 \\ t=5 \\ 920=800\cdot(1+5r) \\ 1+5r=\frac{920}{800}=1.15 \\ \\ 5r=1.15-1=0.15 \\ \\ r=\frac{0.15}{5}=0.03 \\ \end{gathered}$

So, the annual interest = 0.03