If you are paid $10,500 in one year on a $10,000 loan made today, then your interest rate is:

Question

Quizplus · Accepted Answer

To calculate the interest rate, we need to use the simple interest formula:

Interest = (Principal x Rate x Time)

Where:

Principal = $10,000 (the amount borrowed)
Interest = $10,500 - $10,000 = $500 (the amount paid back in one year)
Time = 1 year

Substituting these values:

$500 = ($10,000 x Rate x 1)
Rate = $500 / $10,000
Rate = 0.05 or 5%

Therefore, the interest rate is 5%.

If You Are Paid $10,500 in One Year on a $10,000