If Mega Corp.borrows $9,000 in 2000 and agrees to pay the lender $10,000 in 2001, the interest rate on the loan is approximately:

Question

Quizplus · Accepted Answer

The interest on the loan can be calculated using the formula:

Interest = Principal x Rate x Time

where Principal is the amount borrowed, Rate is the interest rate, and Time is the length of the loan period.

In this case, the Principal is $9,000, and the lender is being paid $10,000, which means that the Interest is $1,000.

To calculate the Interest Rate, we can rearrange the formula as:

Rate = Interest / (Principal x Time)

Plugging in the numbers, we get:

Rate = $1,000 / ($9,000 x 1 year)

Rate = $1,000 / $9,000

Rate = 0.111 or 11.1%

Therefore, the interest rate on the loan is approximately 11.1%. The answer is choice C.