RATE
Rate is the interest of the borrowed amount over the product of its principal and time.
Formula:
Where:
R= rate
I = Interest
P= principal
T = time
Illustrative examples:
1. The $3700 money borrowed has the interest of $85. If the loan is to be paid after 195 days, what is its interest?
Given:
P = $3700
I = $85
T = 190/360 or 0.52778
Required: R = ?
Solution:
= $85 / ( $3700*0.52778)
= $85 / 1952.786
= 0.0435 or 4.35%
2. What is the interest rate charged on a loan of $ 4500 if the interest paid is $250 at the end of 10 months?
Given:
P = $ 4500
I = $250
T = 10/360 or 0.027778
Required: R = ?
Solution:
= $250/ ( $ 4500*0.0277)
= $250 / 125.01
= 1.99 or 2%
3. A certain amount of money amounted $5016 from an amount of $4500 from january to to February 6 the same year. What is the rate?
Given:
P = $ 4500
I = $ 5016 - $ 4500 = $ 516
T = 34 days or 0.0109589 year
Required: R = ?
Solution:
= $516 / 49.315
= 10.46%
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