Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan

amount is:
A. $400.
B. $1,600.
C. $160.
D. $85.
10. Suppose a loan customer is considering two alternative $22,000 loans. Loan 1 requires payment of $1,100
of interest each year and Loan 2 has a 6 percent annual interest rate. Other things equal, the loan customer will:
A. be indifferent between the two loans because they both have the same annual percentage rate.
B. reject both loans because they each carry too high an interest rate.
C. choose Loan 1 because it has a lower annual interest rate than Loan 2.
D. choose Loan 2 because it has a lower annual interest rate than Loan 1.

3 answers

1.
0.05x = 80
x = 80/0.05
x = ?

10. Use the same procedure to find the answer for 10.

160