Sheldon owes $15,000 for a machine with a 10% interest rate. The cost of interest is $1500 per year.The interest that lenders charge borrowers is calculated as a percentage of the principle, or lent amount.
The annual percentage rate, or APR, is a common metric for expressing the interest rate on a loan (APR). Rates of interest may also apply to money earned via a savings account or certificate of deposit at a bank or credit union (CD). These bank accounts' interest rates are expressed in terms of annual percentage yields (APY). In essence, the borrower is charged interest for using the asset. Lent assets include cash, consumer items, automobiles, and real estate. Because it raises the cost of borrowing the same amount of money, an interest rate may be thought of as the "cost of money".
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