You put $5000 in an account. The account earns $2250 simple interest in 10 years. What is the annual interest rate?
Mathematics · High School · Tue Nov 03 2020
Answered on
Given:
Principal amount ( P ) = $5000
Interest gained ( I ) = $2250
Term ( t ) = 10
Determine the annual interest rate.
Formula for simple interest.
I = Prt
r = I/Pr
Solution:
Substitute the given values of I, p and t to the formula for the interest rate.
r = 2250/((5000)(10)
r = 2250/50000
r =0.045
Since we are given a decimal answer, in order to convert it into percentage, we multiply the decimal by 100. Hence, in converting a percentage into decimal, we divide the percentage by 100.
r = 0.045 (100)
r= 4.5%
Final answer:
The annual interest rate is 4.5%