To find the annual interest rate on the loan, calculate the interest paid each year as a percentage of the loan amount. Set up the equation 44,245 = x/100 x 25,000 and solve for x. The annual interest rate on the loan is 17.79%.
Explanation:To find the annual interest rate on the loan, we need to calculate the interest paid each year as a percentage of the loan amount. The total interest paid over 10 years is $4,424.50 x 10 = $44,245. We can set up the equation:
44,245 = x/100 x 25,000 in which the value of x can be the variable that stands for the figure that we do not know
Solving for x, we find that the annual interest rate on the loan is 17.79%.