A bank is offering a simple interest loan for 2 dollars comma 500 If the total payback amount is 3 dollars comma 125 after 5 years, what was the bank’s interest rate?

The interest paid was $3,125 − $2,500 = $625. Using simple interest, I = P × r × t, so r = $625 ÷ ($2,500 × 5) = 0.05, or 5%; the bank’s rate was 5 percent.

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