Question

mr floors opened an account with the deposit of $5,000 the account earned him annual simple interest he did not make any additional deposit or withdrawals aMrt the end of 4 years the balance of the account was 6,500 what is the annual interest rate on this account

Answer 1

ANSWER

7.5%

EXPLANATION

The initial amount deposited is $5,000.

After 4 years, the balance is $6,500.

First, find the interest:

$\begin{gathered} \text{Interest}=\text{Amount}-\text{Principal} \\ \Rightarrow I=6500-5000 \\ I=\text{ \ 1,500} \end{gathered}$

To find the rate, use the formula for Simple Interest:

$I=\frac{P\cdot R\cdot T}{100}$

where I = interest

P = principal

R = rate

T = time

From the question:

I = $1500; P = $5000; T = 4 years

Therefore:

$\begin{gathered} 1500=\frac{5000\cdot R\cdot4}{100}=200\cdot R \\ \Rightarrow R=\frac{1500}{200} \\ R=7.5\text{ \%} \end{gathered}$

The rate is 7.5%