The simple interest on a loan of $6,000 over 3 years is $900. What is the annual interest rate?

• A. 4%
• B. 5%
• C. 6%
• D. 7%

Answer: (B)

To determine the annual interest rate for the loan, we can use the formula for simple interest:

[

I = P \times r \times t

]

where:

• ( I ) is the interest earned or paid,

• ( P ) is the principal amount (the initial amount of the loan),

• ( r ) is the annual interest rate (as a decimal), and

• ( t ) is the time in years.

In this problem:

• ( I = 900 ) (the interest earned),

• ( P = 6000 ) (the principal),

• ( t = 3 ) (the duration of the loan in years).

By rearranging the formula to solve for ( r ), we get:

[

r = \frac{I}{P \times t}

]

Substituting the values into this equation gives:

[

r = \frac{900}{6000 \times 3}

]

Calculating the denominator:

[

6000 \times 3 = 18000

]

So, we have:

[

r = \frac{900}{18000} = 0.05

]

To convert ( r ) from