Question

Mona has invested $2840 in a savings account for 6 years. She earned $894.60 in a simple interest. What was the annual interest rate?

Answer 1

The annual interest rate was 5.25%.

Explanation:

Simple interest can be calculated using the following formula: I = PRT, where I=simple interest, P=principal amount, R=percentage rate and T=time. In this problem, Mona started with a principal amount of $2840, or P=2840 and invested for 6 years, or T=6, to gain simple interest in the amount of $894.60, or I=894.60. When we put in the values for our variables in the equation, we get: 894.60 = (2840)(6)R. Multiplying 2840 x 6 = 17040 and gives us: 894.60 = 17040R. Using inverse operations to isolate the variable, we divide both sides by 17040 to get R=0.0525. Since the rate is a percentage, we need to multiply our answer by 100 to get 5.25%.