(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425). The interest rate on this loan is about

Question

Quizplus · Accepted Answer

To find the interest rate on the loan, we need to calculate the total amount of interest paid over the course of the year. Since the lender only gave the borrower $425, we know that the borrower will have to pay back a total of $500 at the end of the year.

The amount of interest paid is therefore $500 - $425 = $75.

To calculate the interest rate, we divide the interest paid by the amount borrowed and multiply by 100 to get a percentage:

Interest rate = ($75 / $500) x 100% = 15%

Therefore, the interest rate on the loan is about 15%, which is closest to choice C) 17.6%.

(Last Word) Suppose You Borrow $500 for a Year and the Lender