Answer to Question #307335 in Economics of Enterprise for kay

Question

Mr. Bacani borrowed money from the bank. He received from the bank P1,842 and promised to repay P2,000 at the end of 10 months. Determine the rate of simple interest.

Answer 1

Let the amount of loan borrowed be (P) = 1842

Let the amount of money to be paid (X) =2000

The payment period (n) = 10 months

The amount of Simple interest (S.I)

(S.I) = 2000-1842 = 158

But simple interest is given by

$(S.I)=(Q*R/100*T)$

P158=$(P1842*R/100*10)$

P158*100=P18420 $R$

$\therefore$ R=0.8577633

The monthly rate of simple interest rate is approximately 0.8578%