Chapter SH, Problem 7.7.13EP

To determine

To calculate:To find the interest rate on the loan

Answer to Problem 7.7.13EP

The interest rate on the loan is $6\%$

Explanation of Solution

Given information:M borrowed $\$1200$ to buy a new computer. She paid the simple interest loan off in $24$ monthly installments of $\$56$ each

Formula used:

Simple interest is calculated as

  $SI=\frac{P\times R\times T}{100}$

Where,

  $P=$ Principal

  $R=$ Rate of Interest

  $T=$ Time in years

Calculation:

Given that M borrowed $\$1200$ to buy a new computer. She paid the simple interest loan off in $24$ monthly installments of $\$56$ each

Total amount paid $=24\times 56=1344$

Thus, the total interest paid is calculated as

  $Interest=Amount-Principal$

Substituting the values,

  $\begin{array}{l}Interest=1344-1200\\ Interest=144\end{array}$

Now,

  $\begin{array}{l}P=\$1200\\ SI=\$144\\ R=r\%\\ T=2years\end{array}$

Simple Interest is calculated as

  $SI=\frac{P\times R\times T}{100}$

Substituting the values,

  $\begin{array}{l}144=\frac{1200\times r\times 2}{100}\\ r=\frac{144}{12\times 2}\\ r=6\%\end{array}$

Conclusion:

Hence, interest rate on the loan is $6\%$