Question

Larry has taken out a $600 loan with a 12 percent interest rate to buy a laptop computer. He needs to repay the loan by the end of two years. He will be paying $28.24 every month for two years. What kind of interest rate is Larry being charged? Explain the reasons for your answer.

Answer 1

Larry is paying the same amount every month for the duration of the loan. So he is being charged a fixed interest rate.

Explanation:

plato answer

Answer 2

The is the concept of financial mathematics, given that Larry has a loan of $600 which has an interest rate of 12%, which is payable within 2 years. This mode of payment is called the simple interest mode of payment. This is because the he has been given a fixed periodic amount of payment. In compound interest, the amount payable is not fixed.