If a lender makes a simple loan of $800 for 3 years and charges 8%, then the amo

Question

If a lender makes a simple loan of $800 for 3 years and charges 8%, then the amount that the lender receive at maturity is $ nothing. (Round your response to the nearest two decimal place) If a lender makes a simple loan of $1500 for one year and charges $50 interest, then the simple interest rate on that loan is nothing%. (Round your response to the nearest whole number) If a borrower must repay $106.50 one year from today in order to receive a simple loan of $100 today, the simple interest on this loan is A. 6.5% B. 5.0% C. 6.0% D. 65%

Explanation / Answer

a) There is a simple loan of $800 for 3 years at 8%, then the amount is given by

Amount = P + PxRxT

A = 800 + 800x8%x3 = $992.

b) Principal is worth $1500 for time = 1 year and charges $50 interest, then find the rate of interest as

50 = 1500 x 1 x R

R = 3.33%

c) Amount is given by $106.50 for 1 year against a loan of $100 today, find the simple interest rate as

106.50 = 100 + 100 x 1 x R

R = 6.50%

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