On this date last year,you borrowed $3,400.You have to repay the loan principal plus all of the interest six years from today.The payment that is required at that time is $6,000.What is the interest rate on this loan?

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we can solve for the interest rate:
$6,000 = $3,400 (1 + r)^6
Dividing both sides by $3,400:
1.7647 = (1 + r)^6
Taking the sixth root of both sides:
1 + r = 1.0845
Subtracting 1 from both sides:
r = 0.0845 or 8.45%

Therefore, the interest rate on this loan is 8.45%.

On This Date Last Year,you Borrowed $3,400