Question

The principal P is borrowed and the loan's future value A at time t is given. Determine the loan's simple interest rate r.

P = $3000.00, A = $3630.00, t = 3 years

% (Round to the nearest tenth of a percent as needed.)

Answer 1

7% simple interest annually

Explanation:

For simple interest, the future value of the loan can be computed by the formula

A = P + I

where P is the principal and I is the interest amount

I = Prt where r =annual interest rate as a decimal, t = number of years

Therefore
A = P + Prt

Switch sides:
P + Prt = A

Prt = A - P

r = (A-P)/Pt

given A = 3630, P = 3000, t = 3 we get

r = (3630-3000)/(3000 x 3)

= 630/9000

= 0.07

In percentage, 0.07 x 100 = 7% annual simple interest