SOLUTION: if a business borrow $16,000 and repays $25,000 in 5 years what is the simple interest rate?

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Question 547688: if a business borrow $16,000 and repays $25,000 in 5 years what is the simple interest rate?
Found 2 solutions by mananth, mathie123:
Answer by mananth(16946) About Me  (Show Source):
You can put this solution on YOUR website!
interest = 25000-16000=9000
9000=25000*5*r
9000/(125000)
=0.072
which is 7.2%

Answer by mathie123(224) About Me  (Show Source):
You can put this solution on YOUR website!
Okay so we know that the simple interest formula is
I=Prt where I is the interest paid, P is the principal amount, r is the rate of interest and t is the time.
In our case, we are not directly given the interest paid, but we can figure it out. We know that the original amount paid was $16 000 and we ended up paying $25 000. This means that we paid 25000-16000=9000 in interest ( ouch!).
We have our t is 5(five years) (this is assuming that the interest is annual).
Also our principal is 16000.

That's the hard part, now just plug these values into the formula and solve for the unknown (r).
I=Prt
9000=16000%2Ar%2A5
9000=80000%2Ar
9000%2F80000=80000%2Ar%2F80000
0.1125=r
Note: Interest rates are in % and this is not so we must move the decimal point to the right two times to get the %.
Therefore the interest rate is 11.25% per year.