What is the annual interest rate on a $16,000 loan if the interest payments are $160 per quarter?

To determine the annual interest rate from the information given, you start by calculating the total interest paid on the loan over a year. Since the interest payments are $160 per quarter, you multiply this amount by the number of quarters in a year, which is four.

Calculating the yearly interest: [

160 \text{ (per quarter)} \times 4 \text{ (quarters)} = 640 \text{ (annual interest)} ]

Next, you move to calculate the annual interest rate by taking the annual interest amount and dividing it by the principal (the amount of the loan). In this case, the loan amount is $16,000.

Calculating the interest rate: [ \frac{640 \text{ (annual interest)}}{16,000 \text{ (loan amount)}} = 0.04 ]

To express this as a percentage, you multiply by 100: [ 0.04 \times 100 = 4% ]

Given that this percentage represents the total interest rate for the year, we need to analyze the range provided in the options. The calculated interest rate is exactly 4%, so the correct answer falls into the second option which specifies that it is 4%,