## Related questions with answers

Question

**Use the simple interest formula $I=P \cdot r \cdot t$.**

Rich borrowed $\$ 16,000$ for 12 years at simple interest to help pay for his schooling. If he repaid a total of $\$ 31,360$, at what interest rate did he borrow the money?

Solution

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1 of 2If Rich borrowed $P=\$16,000$ and repaid $\$31,360$, then the amount of interest was $I=\$31,360-\$16,000=\$15,360$. Since the loan was for $t=12$ years, then:

$\begin{align*} I&=Prt&&\text{Simple Interset Formula}\\ 15,360&=16,000r(12)&&\text{Substitute.}\\ 15,360&=192,000r&&\text{Multiply.}\\ 0.08&=r&&\text{Divide both sides by 192,000.} \end{align*}$

The interest rate was then $r=0.08=8\%$.

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