Question

Elicia opened an account with a deposit of $2,000. The account earned annual simple interest. She did not make any additional deposits or withdrawals. At the end of 8 years, the balance of the account was $3,040. What is the annual interest rate on this account? 5.4% 5.4% 7.2% 7.2% 6.5% 6.5% 2.9%

Answer 1

Answer: 6.5%

Step-by-step explanation:

Given : Principal amount = $ 2000

Time = 8 years

Final amount = $3040

Formula : Simple interest = Final amount - Principal amount

= $3040 - $ 2000

= $1040

Simple interest = Principal x time x rate

Substitute all values in this formula , we get

$1040=2000\times8\times Rate\\\\\Rightarrow\ Rate=\dfrac{1040}{2000\times8}\\\\\Rightarrow\ Rate=0.065\\\\\Rightarrow\ Rate=0.065\times100\\\\\Rightarrow\ Rate=6.5\%$

Hence, the annual interest rate on this account = 6.5%