To borrow money, you pawn your guitar. Based on the value of the guitar, the pawnbroker loans you $960. One month later, you get the guitar back by paying the pawnbroker $1170. What annual interest rate did you pay?

Question

Mathematics

Johnathan Joyce

23 May, 19:15

To borrow money, you pawn your guitar. Based on the value of the guitar, the pawnbroker loans you $960. One month later, you get the guitar back by paying the pawnbroker $1170. What annual interest rate did you pay?

+5

Answers (1)

Know the Answer?

Andres Wilcox · Answer 1

The money was paid at an annual interest of 261.42%

Explanation:

The initial amount of the guitar when it was loaned was $960. After a month the guitar cost $1,170. This means that in one month the price went from $960 to $1,170. Increase in cost = Difference between two costs = $1,170 - $960 = $210. To convert this into a percent we divide the difference in value by the original price and multiply the answer with 100 to convert it into a percentage. % increase in cost = difference between two costs / original cost % increase in cost = ($210 / $960) * 100 = 0.21785 * 100 = 21.785% This 21.875% was the monthly interest that was paid. To convert it into annual interest rate we multiply it with the 12 months. Annual interest rate = monthly interest rate * 12 = 21.785% * 12 = 261.42%. This means if the guitar was loaned for a year, you would have to pay $3469.44.