The owner of Paul's Pawn Shop loans Iarry 200.00 using his...

The owner of Paul's Pawn Shop loans Iarry $\$ 200.00$ using his Toro riding mower as collateral. Thirteen weeks later Larry comes back to get his mower out of pawn and pays Paul $\$240.00.$ What was the annual simple interest rate on this loan?

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Key Concepts

Principal

The principal is the original amount of money that is loaned or invested, on which interest is calculated. It forms the base value for further interest computations and is essential for determining the total amount due when repaying a loan or achieving a target investment return.

Simple Interest

Simple interest is a method for calculating the interest charge on a loan where the interest is computed only on the principal amount. It is calculated using the formula Interest = Principal × Rate × Time, which makes it easier to understand and apply in scenarios that do not involve compounding.

Time Conversion

Time conversion involves expressing the duration for which interest is calculated in the appropriate units, usually converting shorter periods into years when the interest rate is given on an annual basis. This ensures consistent and accurate calculation of interest based on the standard time unit.

Annual Interest Rate

The annual interest rate is the percentage of the principal that is paid as interest over one year. It allows borrowers and lenders to compare different financial products on a common time basis and is derived by extrapolating the interest accrued over a period that is not typically one year.

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