Your college has agreed to give you a $10,000 tuition loan. As part of the agreement, you must repay $12,600 at the end of the three-year period. What interest rate is the college charging?

Question

Quizplus · Accepted Answer

The college is charging an 8% interest rate. This can be found using the formula for simple interest: $I = PRT$, where $I$ is the interest ($2,600), $P$ is the principal amount ($10,000), $R$ is the rate, and $T$ is the time (3 years). Rearranging the formula to solve for $R$, we get $R = I / (PT)$. Plugging in the numbers, $R = 2600 / (10000*3) = 0.0867$, which is approximately 8.67%, rounding to the nearest whole number gives 8%.

Your College Has Agreed to Give You a $10,000 Tuition