If Mega Corp.borrows $8 000 and agrees to pay the lender $9 000 in 1 year,the annual interest rate on the loan is approximately _____%.

Question

Quizplus · Accepted Answer

The formula to calculate interest rate is:
Interest rate = (Interest / Principal) x (100 / Time)

Here, Principal (P) = $8,000
Amount to be paid after 1 year (A) = $9,000
Time (t) = 1 year

Interest (I) = A - P = $1,000

Substituting these values in the formula:
Interest rate = (1000 / 8000) x (100 / 1)
= 0.125 x 100
= 12.5%

Therefore, the annual interest rate on the loan is approximately 12.5%. The correct choice is C).