pay annual ranch operating expenses for such items as fertilizer and

labor. The loan was made for a 9 month period, and paid off at the end

of the 9 months. The lender charged 7 percent interest on the money

loaned. Calculate the cost of the loan to the rancher.

 Determine the annual cost of the loan by multiplying the total

 amount of the loan, or $4,500, by the annual interest of 7 percent.

 $4,500 X .07 $315.00

 The annual cost of the loan would be $315. Determine the cost of

 the loan for one month by dividing the annual cost by 12.

 $315.00 12 $26.25

 The cost of the loan for one month would be $26.25. Determine the

Cost of the loan for 9 months by multiplying the cost for one month by 9.

 $26.25 X 9 months $236.25

 The cost of the loan of $4,01)0 carrying an annual rate of interest

 of 7 percent for a period of 9 months was $236.25.

 You might know what a loan had cost in dollars and want to know the

 simple interest rate (R).
 Dollar cost of credit
 Simple Interest Rate -
 Amount borrowed

 Example: A $100 loan for one year with a Dollar Cost of $8.00.

 R = -00 .08 8.0%
 $100

 If you buy anything on the installment plan, or on a credit card,

 you must usually pay a higher rate of interest than "bank rates of

 interest". For example, many major oil companies charge 1.5% interest

 on the unpaid balance per month. This is 18% on the basis of simple

 annual interest (12 x 1.5 18). Remember that any agency extending

 credit must tell you what the interest will be on the basis of simple