Multiple choice

To invest in his land, a farmer went to a bank and asked for a loan, which he received as \$8,000 at a basic annual interest rate of 'r' percent. The farmer made a single payment of \$8,420 to repay the debt, including interest, after a year. What is the value of r?

  1. 5.25

  2. 5.50

  3. 6.05

  4. 25.50

  5. 30.55
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A Correct answer
Explanation

Interest = 8420 - 8000 = 420. Interest = P * r * t / 100. 420 = 8000 * r * 1 / 100. 420 = 80r. r = 420/80 = 5.25.

AI explanation

The total interest paid is the repayment amount minus the principal, which is 8420 - 8000 = 420. Using the simple interest formula SI = (P * R * T) / 100 for one year, we get 420 = (8000 * r * 1) / 100. Solving for r gives 420 = 80r, so r equals 5.25.

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