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Liam borrowed a total of $35,000 to pay for college. He pays his parents 3% interest on the $8,000 he borrowed from them and pays the bank 6.8% on the rest. What average interest rate does he pay on the total $35,000? (Round your answer to the nearest tenth of a percent.)

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sqdancefan

The weighted average of the interest rates is ...

[tex]\dfrac{\$8000\times 3\%+27000\times 6.8\%}{\$35000}=\dfrac{\$240+1836}{\$35000}\\\\=\dfrac{2076}{35000}\approx 5.9\%[/tex]

The average interest will vary with payments made, but as long as the entire balance is outstanding (and interest is not compounded), the average rate is about 5.9%.

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