Question

2. A friend promises to pay you 600 two years from now if you loan him 500 today. What annual interest rate is your friend offering?
(a) 7.5%
(b) 8.5%
(C) 9.5%
(d) 10.5%
(e) 11.5%​

Answer 1

SOLUTION

A friend promises to pay you 600 two years from now if you loan him 500 today. What annual interest rate is your friend offering

(a) 7.5%

(b) 8.5%

(C) 9.5%

(d) 10.5%

(e) 11.5%

EVALUATION

Here

P = 500

Amount to pay = 600

Time = n = 2 years

Let rate of interest = r %

So by the given condition

$\displaystyle \sf{500 { \bigg( 1 + \frac{r}{100} \bigg)}^{2} = 600}$

$\displaystyle \sf{ \implies \: { \bigg( 1 + \frac{r}{100} \bigg)}^{2} = \frac{6}{5} }$

$\displaystyle \sf{ \implies \: { \bigg( 1 + \frac{r}{100} \bigg)}^{2} = 1.2 }$

$\displaystyle \sf{ \implies \: { \bigg( 1 + \frac{r}{100} \bigg)}^{} = \sqrt{1.2} }$

$\displaystyle \sf{ \implies \: { \bigg( 1 + \frac{r}{100} \bigg)}^{} = 1.095 }$

$\displaystyle \sf{ \implies \: { \frac{r}{100} }^{} = 0.095 }$

$\displaystyle \sf{ \implies \: r = 9.5 }$

FINAL ANSWER

The correct option is (C) 9.5%

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Answer 2

Answer:

9.5%

Explanation:

Because the loan amnt is 500

the interest rate could be 9.5%