Question

You borrowed $25 from your friend. You paid him back in full after 6 months. He charged $2 for interest. What was the annual simple interest rate that he charged you? Use the formula: I = Prt.

Answer 1

16%

Explanation:

Great answer! When you divide the interest by the product of the principal and time, you get 0.16, which when converted to a percent is 16%.

Answer 2

the money you borrow = 25 dollars.
HE charged you 2% interest for 6 months
=> in 12 months = 2% interest
25 dollars * .02 = 0.5 dollars for 6 months.
=> 25 + 0.5 = 25.50 dollars
for 1 year
=> 25 * 0.04 =1 dollar
=> 26 dollars in a year