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%

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*8* Rate\\\\\Rightarrow\ Rate=(1040)/(2000*8)\\\\\Rightarrow\ Rate=0.065\\\\\Rightarrow\ Rate=0.065*100\\\\\Rightarrow\ Rate=6.5\%`

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