Engineering Economics Blog

An employee at LaserKinetics.com borrows $10,000 on May 1 and must repay a total of  $10,700 exactly 1 year later. Determine the interest amount and the interest rate paid.

 Solution

 The perspective here is that of the borrower since $10,700 repays a loan. Apply Equation [1.1] to determine the interest paid.

 Interest  paid = $10,700 - 10,000 = $700

 Equation [1.2] determines the interest rate paid for 1 year.