Question

1. Joseph borrows $10,000 from the shady loan shark, Mr. Wildcat. Mr. Wildcat tells him he must repay the loan in 1 month and pay an additional $1000 in interest. If Mr. Wildcat is charging simple interest on his loan, what is the annual interest rate?

Answer 1

$12,000

Answer 2

the answer will be a % because the question asks for 'interest rate'

Answer 3

I got -1.1 and im pretty sure that is wrong since its negative

Answer 4

$1,000 is what percent of $10,000?

\( percent = \dfrac{part ~amount}{total ~amount} \times 100 \)

First, use the formula above to find what percent of $10,000 is $1,000.

Answer 5

10%?

Answer 6

The part amount is $1,000.
The total amount is $10,000.
Correct.

Answer 7

He is charging 10% interest in 1 month.
1 year = 12 months
How much interest is he charging in 1 year?

Answer 8

120?

Answer 9

Correct. The annual interest rate is 120%.

Answer 10

so thats the answer? wow that seems so easy!

Answer 11

That's it.

Answer 12

well thank you very much!

Answer 13

You're very welcome.

Answer 14

Why is it 120%? Can someone give me the formula to get that?

Answer 15

@Mathstudent55

Answer 16

The formula for percentage is shown above.
I'll do it here again.

\(percent = \dfrac{part}{total} \times 100 \%\)

In this case, the total amount of the loan was $10,000. That is the "total" in the percent formula.
The interest paid was $1,000. This is the "part" in the formula.
We want to know $1,000 is what percent of $10,000.

By using the formula, we get:

\(percent = \dfrac{$1000}{$10,000} \times 100 \%\)

\( percent = \dfrac{1}{10} \times 100 \%\)

\(percent = 10 \%\)

By using the formula, we now know that $1,000 is 10% of $10,000.
That means that the loan had an interest rate of 10% in one month.
Since there are 12 months in a year, and the problem is asking for the annual interest rate, we must multiply the monthly interest rate by 12 to get

\(12 \times 10 \% = 120 \%\)

The final answer is:
The annual interest rate is 120%.