Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are
A) 14 percent and 20 percent, respectively.
B) 14 percent on both loans.
C) 18.8 percent on both loans.
D) 1.4 percent and 11.8 percent, respectively.

Question

Quizplus · Accepted Answer

To find the interest rates, we need to divide the annual interest payment by the principal amount and then multiply by 100 to get a percentage.

For the first loan, the interest rate is (140/1000) x 100 = 14%.

For the second loan, the interest rate is (1188/8485) x 100 ≈ 14%.

Therefore, the answer is B, both loans have an interest rate of 14%.

Suppose That Interest Payments Are $140 Per Year on a $1,000