SOLUTION: Bill borrows $7,500 for 3 years, subject to a simple interest rate. At the end of the 3-year loan period, the interest owed is $1,271.25. What was the simple yearly interest rate

Algebra ->  Customizable Word Problem Solvers  -> Finance -> SOLUTION: Bill borrows $7,500 for 3 years, subject to a simple interest rate. At the end of the 3-year loan period, the interest owed is $1,271.25. What was the simple yearly interest rate      Log On

Ad: Over 600 Algebra Word Problems at edhelper.com


    

Question 1139098: Bill borrows $7,500 for 3 years, subject to a simple interest rate. At the end of the 3-year loan period, the interest owed is $1,271.25. What was the simple yearly interest rate (as a percent)?
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
simple interest formula is i = p * r * n

i is the interest
p is the principal
r is the interest rate per time period
n is the number of time periods

in your problem, the formula becomes 1271.25 = 7500 * r * 3

the time period is in years.

solve for r to get r = 1271.25 / (7500 * 3) = .0565.

confirm by replacing r in the original formula to get:

i = 7500 * .0565 * 3.

solve for i to get i = 1271.25, confirming the solution is good.