Question

A deposit of $10,000.00 was made to an account the year you were born. After 12 years, the account had earned $6,600.00 in interest. What simple interest rate did the account earn?

Answer 1

5.5% per year

Explanation:

Using Formula A = P (1 + rt)

Where

A = Final amount = $10,000 + $6,600 = $16,600

P = Principal = Beginning Amount = $10,000

t = time = 12 years

r = rate in $/year (which we need to find)

Assembling the formula

A = P (1 + rt)

16,600 = 10,000 (1 + 12r)

`(16,600)/(10,000)` = 1 + 12r

1.66 = 1 + 12r

1.66 - 1 = 12r

0.66 = 12 r

r = 0.055 = 5.5%