Question

Kyle paid $96 in interest to borrow $7200 for 4 months.

What annual interest rate did Kyle pay?









A.
1.33%







B.
4%







C.
5.33%







D.
16%

Answer 1

A

Answer 2

As it is not specified in question if its being calculated using simple interest or compound interest
I used compound interestone
Using formula for compound interest :
A=P(1+r/100)^n
where A is amount,P is principal,r is rate and n is time
So Interest charged,I =A-P
or, I=P{[(1+(r/100))^n]-1}
or, 96 =7200{[1+(r/4*100)^4]-1}
or,96/7200=[1+(r/400)]^4]-1
or,7296/7200=[1+(r/400)]^4
or,\[\sqrt[4]{1.01333}\]=1+(r/400)
or,1.0032=1+(r/400)
or,r=1.327%~ 1.33%
Option A
If I would have used simple interest formula, my answer will be 1.2%