Answer to Question #265379 in Financial Math for sumu

Question

David bought a radio for $79.95. He paid $19.95 down payment and agreed to pay the balance plus an interest in three months. If the total interest he paid was $6, what is the rate of simple interest in three months?

Answer 1

Cost of the radio=$79.95

Down payment=$19.95

Value of loan to purchase radio for 5 months

$=79.95-19.95=60$

Total interest paid for 3 months=6

Interest=loan value×time ×interest rate per annum

Time$=\frac{3}{12}$ Years

$6=60\times\frac{3}{12}×interest rate$

$\frac{6×12}{60×3}=0.4$

Interest rate for 3months

$0.4×\frac{3}{12}$

=0.1 or 10%