Answer:
The rate of interest applied on the loan is 2.4%
Step-by-step explanation:
Given as :
The principal amount borrows as loan = p = $4200
The time period of loan = t = 5 years = 5 × 12 = 60 months
The monthly payment for loan = $78.40
So, The payment for 60 months = $78.40 × 60 = $4704
i.e Amount after 60 months = $4704
Let The rate of interest = r at simple interest
Now, From Simple Interest method
Simple interest = [tex]\dfrac{\textrm principal\times \textrm rate\times \textrm time}{100}[/tex]
Or, s.i = [tex]\dfrac{\textrm p\times \textrm r\times \textrm t}{100}[/tex]
Or, (Amount - principal) = [tex]\dfrac{\textrm p\times \textrm r\times \textrm t}{100}[/tex]
Or, $4704 - $4200 = [tex]\dfrac{\textrm 4200\times \textrm r\times \textrm 5}{100}[/tex]
Or,504 × 100 = 21,000 × r
∴, r = [tex]\dfrac{50400}{21000}[/tex]
i.e r = 2.4
So, The rate of interest = r = 2.4%
Hence, The rate of interest applied on the loan is 2.4% Answer
