Gary borrowed $1200 from a bank. He had to repay $2.20 as simple interest after 2 months. Determine the interest rate per annum.
Question
Gary borrowed 2.20 as simple interest after 2 months. Determine the interest rate per annum.
Solution
To find the annual interest rate, we first need to understand the formula for simple interest, which is:
I = PRT
where: I = Interest P = Principal amount (the initial amount of money) R = Rate of interest T = Time period
In this case, we know: I = 1200 T = 2/12 (since the time is given in months, we need to convert it to years, and 2 months is 2/12 of a year)
We need to find R. So, we rearrange the formula to solve for R:
R = I / (PT)
Substituting the given values:
R = 2.20 / (1200 * 2/12)
Solving this will give us the interest rate per annum.
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