PLEASE CLOSE THIS WINDOW WHEN
YOU ARE FINISHED WITH IT.

Solution: (simple interest, working backwards)

Jane's loan was $250. Therefore the interest she received was $287.50 - $250 = $37.50. This took place over a 5 year period, so each year she received

$37.50
 = $7.50
5

interest. To compute the interest rate, we need to solve the equation

$7.50 = what percent of $250?

In other words, for what number r is 7.50 = r 250? The answer is

7.50
 = .03.
250

We conclude that John paid 3% simple interest.

© 1997,1998 Robby Robson, Oregon State University.