1954 AHSME Problems/Problem 33

A bank charges $\textdollar{6}$ for a loan of $\textdollar{120}$ . The borrower receives $\textdollar{114}$ and repays the loan in $12$ easy installments of $\textdollar{10}$ a month. The interest rate is approximately:

$\textbf{(A)}\ 5 \% \qquad \textbf{(B)}\ 6 \% \qquad \textbf{(C)}\ 7 \% \qquad \textbf{(D)}\ 9\% \qquad \textbf{(E)}\ 15 \%$

Solution

The borrower pays $\textdollar{120}$ in a single year for a loan of $\textdollar{114}$ . This means that the bank charges an interest of $\textdollar{6}$ for a loan of $\textdollar{114}$ over a single year, so that the annual interest rate is $100*\frac{\textdollar{6}}{\textdollar{114}} = \frac{100}{19} \approx 5$ percentage points. Therefore, our answer is $\boxed{\text{(A)}}$ and we are done.

1954 AHSC (Problems • Answer Key • Resources)
Preceded by Problem 32	Followed by Problem 34
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1954 AHSME Problems/Problem 33

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