Suppose you borrow $1,000 today with the promise to pay back $1,070 one year from today. Based upon this information, the interest rate is __________, and the interest is __________.

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Begin by identifying the loan details: you borrow 1000 today and repay 1070 one year from now. The interest amount is the difference between the repayment and the principal, which is 1070 − 1000 = 70. The interest rate is the interest divided by the principal, so 70/1000 = 0.07, which equals 7%.

Option 1: "$70; 7 percent" lists the interest amount first and then the rate. While both values are correct, the statement typically presents the rate before the amount of interest, so this order is misleading despite correctness of numbers.

Option 2: "7 percent; $1,070" correctly states the rate as 7 percent but incorrectly identifies the interest amount as 1,070, which is the total repayment, not the interest itself. This conflates total repayment with interest.

Option 3: "7 percent; $70" matches both the correct interest rate (7%) and the correct interest amount ($70). This aligns with the standard interpretation of interest over one year on a 1000 principal to 1070 repayment.

Option 4: "10 percent; $100" uses an incorrect rate and an incorrect interest amount, which would imply a different repayment total (1100) than the one given, so this is not consistent with the scenario.

Option 5: "$100; 10 percent" again mixes up the figures, presenting a $100 interest and a 10% rate, which would imply a total repayment of 1100, not 1070. This pair does not reflect the described loan.

Princip of Econ-Microeconomics Module 13 Homework Assignment

Suppose you borrow $1,000 today with the promise to pay back $1,070 one year from today. Based upon this information, the interest rate is , and the interest is .

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