Question
Gil borrows $8,000 for college expenses. He will pay a total of $10,280 after 6 years. Gil says the interest rate is at least 5%. Is he correct? Explain.
Answers
GPT 3.5
To determine if Gil is correct about the interest rate being at least 5%, we can calculate the annual interest rate using the formula for simple interest:
Total amount paid = Principal + Interest
$10,280 = $8,000 + Interest
Interest = $10,280 - $8,000 = $2,280
Now, we can calculate the annual interest rate:
Interest = Principal * Rate * Time
$2,280 = $8,000 * Rate * 6
Rate = $2,280 / ($8,000 * 6) = 0.0475 or 4.75%
Since the calculated annual interest rate is 4.75%, Gil is incorrect in stating that the interest rate is at least 5%.
Total amount paid = Principal + Interest
$10,280 = $8,000 + Interest
Interest = $10,280 - $8,000 = $2,280
Now, we can calculate the annual interest rate:
Interest = Principal * Rate * Time
$2,280 = $8,000 * Rate * 6
Rate = $2,280 / ($8,000 * 6) = 0.0475 or 4.75%
Since the calculated annual interest rate is 4.75%, Gil is incorrect in stating that the interest rate is at least 5%.