Question

Emma Watson, buy a piano that costs $ 100,000. Make a 35% advance
and agree to pay $ 70,850 nine months later. What annual simple
interest rate do I pay?

Answer #1

Cost of Piano = $100,000

Emma pays 35% in advance and agree to pay $ 70,850 nine months later

Amount borrowed = $100,000*(1-0.35)

Amount borrowed = $65,000

Total payment = Principal borrowed*[1+(Simple Interest rate*Time period)]

where, Total payment = $70,850

Time period = 9 months/12 months = 0.75

$70,850 = $65,000*[1+(Simple Interest rate*0.75)]

1.09 = [1+(Simple Interest rate*0.75)]

(Simple Interest rate*0.75) = 1.09 - 1

Simple Interest rate*0.75 = 0.09

Simple Interest rate = 0.12

So, **Annual SImple Interest rate paid is 12%**

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