Mona borrowed $6,000 for college expenses. After 2 1/2 years she will have paid $750 in interest. What is the interest rate?



Answer :

Simple interest is represented by the expression:

[tex]\begin{gathered} I=p\cdot r\cdot t \\ I=\text{interest earned after t years} \\ p=\text{ money borrowed} \\ r=\text{annual rate of interest} \\ t=\text{ the length of time you borrow} \end{gathered}[/tex]

Understanding this expression, we can substitute our values:

[tex]750=6,000\cdot r\cdot2.5[/tex]

Isolating our variable of interest (r):

[tex]\begin{gathered} r=\frac{750}{6,000\cdot2.5} \\ r=0.05 \end{gathered}[/tex]

The interest rate is 0.05 or 5%