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Calculating the Interest Rate from Principal and Repayment
When the repayment amount and the original principal of a loan are known, the annual interest rate (r) can be calculated. The formula is derived from the basic loan repayment structure. To find the rate, you divide the total repayment by the principal and then subtract one.
Formula: interest rate (r) = (repayment / principal) – 1
For example, if a principal of $91 is repaid with $100 after one year, the annual interest rate is ($100 / $91) - 1, which is approximately 0.10, or 10%.
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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