Suppose that you borrow $10,000 for two years, and at the end of the second year, you must repay $11,664. The interest rate is

Question

Quizplus · Accepted Answer

To find the interest rate, we can use the formula:

Total amount paid = principal + interest

In this case, the principal (amount borrowed) is $10,000 and the total amount paid after two years is $11,664. Therefore:

$11,664 = $10,000 + Interest

Interest = $1,664

To find the annual interest rate, we can divide the interest by the principal and then divide by the number of years:

Annual interest rate = (Interest / Principal) / Number of years

Annual interest rate = ($1,664 / $10,000) / 2 = 8.32%

Therefore, the closest option is B) 8.0 percent.

Suppose That You Borrow $10,000 for Two Years, and at the End