What is the effective interest rate on Sally's mortgage if she pays $4,467 in interest on a principal of $100,000?

To determine the effective interest rate on Sally's mortgage, you can use the formula for calculating the interest rate, which is the total interest paid divided by the principal amount.

In this case, Sally pays $4,467 in interest on a loan amount of $100,000. To find the interest rate, you would calculate it as follows:

1. Divide the interest paid by the principal:

[

\text{Interest Rate} = \frac{\text{Interest Paid}}{\text{Principal}} = \frac{4,467}{100,000} = 0.04467

]

2. Convert this decimal to a percentage by multiplying by 100:

[

0.04467 \times 100 = 4.467%

]

When rounding to one decimal place, this results in an approximate interest rate of 4.5%.

This calculation shows how the effective interest rate reflects the relationship between the interest paid and the principal amount of the mortgage. Thus, in this scenario, the correct answer is indeed that the effective interest rate is closest to 4.5%, demonstrating how one would derive the effective interest rate based on the total interest incurred relative to