The maturity value of a 4-month loan of $8,250 is $8,363.50. What is the annual simple interest rate (in percent) on this loan? (Round your answer to one decimal place.)

Answer 1

To find the annual simple interest rate, we can use the formula for simple interest:

Interest = Principal x Rate x Time

Given that the principal (P) is $8,250, the maturity value (A) is $8,363.50, and the time (T) is 4 months (which is 1/3 of a year), we can calculate the interest:

Interest = A - P
Interest = $8,363.50 - $8,250
Interest = $113.50

Now, we can plug in the values into the formula to find the rate:

$113.50 = $8,250 x Rate x (1/3)
Rate = $113.50 / ($8,250 x 1/3)
Rate = $113.50 / $2,750
Rate = 0.0413

Converting to a percentage:

Rate = 0.0413 x 100
Rate = 4.13%

Therefore, the annual simple interest rate on this loan is 4.1%.