Question 1160014: The simple interest for buying a passenger transit rail is shown as the product of the principle amount (P), time (in years), and annual rate (R). The City of Phoenix plans to buy five additional mass transit cars for $15 million, and pay off its loan in 30 years. What would the annual percentage rate be if the city plans to make an interest payment of $2 million?
Answer by ikleyn(54018)   (Show Source):
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The simple interest for buying a passenger transit rail is shown as the product of the principle amount (P),
time (in years), and annual rate (R). The City of Phoenix plans to buy five additional mass transit cars
for $15 million, and pay off its loan in 30 years.
What would the annual percentage rate be if the city plans to make an interest payment of $2 million?
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The general formula for simple interest is
I = P*r*t,
where I is the interest ($2,000,000 in this problem,
r is the interest rate per year (as a decimal),
t is the time in years (30 years in this problem).
So, we have this equation
2,000,000 = 15,000,000*r*30.
From this equation, we find the annual rate
r =  =  =  =  = 0.00444..., or 0.444% (approximately)
ANSWER. In this problem, the annual percentage rate is about 0.444%.
Solved.
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