The maturity value of a 4-month loan of $5,250 is $5,361.50. What is the annual simple interest rate (in percent) on this loan? (Round your answer to one decimal place.)
Show your work
To calculate the annual simple interest rate, we first need to find the simple interest earned on the loan.
Simple Interest = Maturity Value - Principal
Simple Interest = $5,361.50 - $5,250
Simple Interest = $111.50
Next, we need to find the simple interest rate for 4 months and then convert it to an annual rate.
Simple Interest Rate for 4 Months = (Simple Interest / Principal) * (12 / 4)
Simple Interest Rate for 4 Months = ($111.50 / $5,250) * (12 / 4)
Simple Interest Rate for 4 Months = 0.02119
Finally, to find the annual simple interest rate, we multiply the 4-month rate by 3 to convert it to a yearly rate.
Annual Simple Interest Rate = 0.02119 * 3 * 100
Annual Simple Interest Rate = 6.36%
Therefore, the annual simple interest rate on this loan is 6.4%.