Pat Bosky just paid $843 to repay the principal and interest for a six-month, $800 loan. Pat paid a simple annual interest rate of __________ percent.
A) 4.3
B) 8.6
C) 10.8
D) 16.8

Question

Quizplus · Accepted Answer

To find the annual interest rate, we need to use the simple interest formula:

I = Prt

Where I is the interest paid, P is the principal (initial loan amount), r is the annual interest rate (as a decimal), and t is the time period in years.

We know that Pat borrowed $800 for six months, or 0.5 years. We also know that she repaid a total of $843.

To find the interest paid, we can subtract the principal from the total amount paid:

I = $843 - $800 = $43

Now we can plug in the values we have into the formula and solve for the annual interest rate:

$43 = $800 * r * 0.5

r = $43 / ($800 * 0.5) = 0.1075 or 10.75%

Rounding to the nearest tenth, we get 10.8%, which corresponds to answer choice C).

Pat Bosky Just Paid $843 to Repay the Principal and Interest