If james borrows $4,200 to pay his college tuition. he signs a 5 year simple interest loan. if monthly payments are $78.40, what is the interest rate on the loan?

The rate of interest applied on the loan is 2.4%

Step-by-step explanation:

Given as :

The principal amount borrows as loan = p = $4200

The time period of loan = t = 5 years = 5 × 12 = 60 months

The monthly payment for loan = $78.40

So, The payment for 60 months = $78.40 × 60 = $4704

i.e Amount after 60 months = $4704

Let The rate of interest = r at simple interest

Now, From Simple Interest method

Simple interest =

Or, s.i =

Or, (Amount - principal) =

Or, $4704 - $4200 =

Or,504 × 100 = 21,000 × r

∴, r =

i.e r = 2.4

So, The rate of interest = r = 2.4%

Hence, The rate of interest applied on the loan is 2.4% Answer