Question

Maggie is taking out a student loan for $2,600. She plans on paying off the loan in 3 years. At the end of 3 years, Maggie will have paid $390 in interest. What is the simple interest rate on the student loan?

Answer 1

`5%`

Explanation:

Let the interest rate be `x/100`

So we have for simple interest: `x/100xx$2600=$390`

This is the same as: `color(white)("dddddddddd") x xx($2600)/100=$390`

`x xx($26cancel(00))/(cancel(100))=$390`

Divide both sides by $26.

`x xx($26)/($26)=($390)/($26)`

`x xx1=($390)/($26)`

`x=15`

But `x` is from `x/100`

The % symbol is like a unit of measurement and one that is worth `1/100`

So `15/100color(white)("d")->color(white)("d")15xx1/100color(white)("d")->color(white)("d")15xx%->15%`

But this is over 3 years so the annual interest rate is `color(white)("d")(15%)/3=5%`