Question

My cousin borrowed $15,000 for a new car loan for 5 years. He told me that at the end of the loan, he had paid $21,000 for the interest and principal. What was the rate of the loan? A. 7% B. 8% C. 9% D. 10%

Answer 1

I got `8%`

Explanation:

I interpreted the question like this:

The total interest payed will be:

`$21,000-$15,000=$6000`

that gives each year:

`($6,000)/5=$1,200`

we use a proportion to write it in terms of `%`:

`$15,000:$1200=100%:x%`

rearrange:

`x%=(cancel($)1,200*100%)/(cancel($)15,000)=8%`

Answer 2

The answer is none of the choices you listed. But if we were to keep going down of doing the same process, it would be 40% of the loan rate.

Explanation:

7% interest

`7/100=0.07`
`15,000*0.07=1,050`
`15,000+1,050=16,050`

8% interest

`8/100=0.08`
`15,000*0.08=1,200`
`15,000+1,200=16,200`

9% interest
`9/100=0.09`
`15,000*0.09=1,350`
`15,000+1,350=16,350`

10% interest
`10/100=0.10`
`15,000*0.10=1,500`
`15,000+1500=16,500`

So it really none of the selected choices you listed.

So if we were to keep doing of listing percentages, we eventually found out that:

40% interest
`40/100=0.40`
`15,000*0.40=6,000`
`15,000+6,000=21,000`