If Mega Corp. borrows $9,000 and agrees to pay the lender $10,500 in one year, the annual interest rate on this loan is approximately _____%.

Question

Quizplus · Accepted Answer

The formula for calculating simple interest is I = Prt, where I is the interest, P is the principal amount borrowed, r is the annual interest rate, and t is the time in years. 
In this scenario, we can plug in the given values: 
I = $1,500 (the interest Mega Corp. will pay)
P = $9,000 (the principal borrowed)
t = 1 year
$1,500 = $9,000r(1)
Solving for r, we get:
r = $1,500/$9,000 = 0.1667 (rounded to four decimal places)
Multiplying by 100 to convert to a percentage:
r = 16.67%
Therefore, the annual interest rate on the loan is approximately 16.67%, making answer choice C the correct choice.