Question

Madison currently has a balance of 5503.51 ina an account earning simple interest. 19 years ago she opend up an account with an intial deposit of 3196. What is the interest rate on the account o

Answer 1

The simple interest is 3.80% per year.

Explanation:

We are presented with a simple interest problem and the following information has been availed;

Accumulated amount = 5503.51

Time = 19 years

Principal = 3196

The first step is to determine the total interest earned over the entire time period;

Interest = Amount - Principal

= 5503.51 - 3196

= 2307.51

The simple interest formula states the total interest earned is equal to the product of the principal, the interest rate and the time;

`I=(P*R*T)/(100)`

Making R the subject of the formula yields;

`R=(100*I)/(P*T)`

Substituting the values we have and simplifying;

`R=(100*2307.51)/(3196*19)=3.80`

The simple interest is thus 3.80% per year.