Question

a credit card company charges a customer $18 interest on a $90 purchase. what is the interest rate? a) 2% b) 5% c) 10% d) 20%

Explanation:

Step1: Recall the interest rate formula

The formula for calculating the interest rate \( r \) is \( r=\frac{I}{P}\times100\% \), where \( I \) is the interest and \( P \) is the principal amount. Here, \( I = 18 \) dollars and \( P=90 \) dollars.

Step2: Substitute the values into the formula

Substitute \( I = 18 \) and \( P = 90 \) into the formula: \( r=\frac{18}{90}\times100\% \).

Step3: Simplify the fraction

Simplify \( \frac{18}{90}=\frac{1}{5} \). Then \( \frac{1}{5}\times100\% = 20\% \).

Answer:

D) 20%