Question

If you receive \(\$ 500\) in simple interest on a loan that you made for \(\$ 10,000\) for five years, what was the interest rate you charged?

Short answer

The interest rate you charged on the loan was \(1\%.\)

Step-by-step solution

Rearrange the simple interest formula to find R

We have Simple Interest = P * R * T. To isolate R, we'll divide both sides of the equation by (P * T): R = Simple Interest / ( P * T)

Substitute the given values

Now, we'll substitute the values given in the exercise: R = \(\frac{500}{(10000 * 5)}\)

Calculate R

We can now calculate R: R = \(\frac{500}{50000}\) R = 0.01

Convert R to percentage

To express the interest rate in percentage form, we'll multiply R by 100: Interest Rate = \(0.01 * 100\) Interest Rate = 1% The interest rate you charged on the loan was 1%.