How to Find Simple Interest Rate

The simple interest rate is interest paid divided by the loan (or principal).

Formula:
r = I / Pt
where: r = interest rate, I =simple interest, P = principal, t = time

Learn how to find the annual simple interest rate (in percentage) with the following examples:

Example 1:
Find the rate of simple interest that will give an interest of $5,600 on a principal of $60,000 after 5 years.
Solution:
r = I / Pt = 5600 / (60,000 * 5) = 56000 / 300000 = 0.187 = 18.7 %
Thus, the rate of simple interest is 18.7 percent.

Example 2:
Peter borrowed $28,000 for 9 years. The amount owing at the end of the period was $32,000. Calculate the simple interest rate on the loan.
Solution:
I = 32,000 - 28,000 = $4,000
r = I / Pt = 4,000 / (28,000 * 9) = 4,000 / (252000) = 0.0159 = 1.59 %

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