Section 8.1 Loans and Interest
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Solution
Step 1: Divide the annual interest amount by the principal. Round to the nearest
hundred-thousandth (0.00001) if necessary.
annual interest rate = annual interest amount ÷ principal
annual interest rate =$317.06 ÷ $4,450
annual interest rate ≈ 0.07125
Step 2: Convert the annual interest rate to a percentage by moving the decimal
two places to the right.
0.07125 → 7.125%
Check It
Danielle borrowed $3,175 for a one-year term loan. She paid a total of $254
in annual interest. What was Danielle’s annual interest rate?
Checkpoint 8.1
1. Marvella received a loan from her bank in the sum of $5,165 for a period
of one year. The annual interest rate for the loan is 5.75%. The full amount
of the principal and interest are due at the end of one year. Determine the
amount of interest that Marvella will pay.
2. Alvin borrowed $1,050 using the ordinary interest method. He agreed to
pay an annual interest rate of 4.85%. He will repay the loan in six months.
Calculate the amount of interest that Alvin will pay.
3. Dina borrowed $2,890 using the method of exact interest. She will pay an
annual interest rate of 6.45% and will repay the loan in 85 days. Calculate the
total amount that Dina will pay back when she repays the loan.
4. Rafi k borrowed $1,600 for a one-year loan. He paid $131.20 in interest. What
was the annual interest rate on Rafi k’s loan?
5. Panna borrowed $2,715 for a one-year term loan. She paid a total of $162.90
in annual interest. What was Panna’s annual interest rate?