Question

Justin deposited $2,000 into an account 5 years ago. Simple interest was paid on the account. He has just withdrawn $2,876. What interest rate did he earn on the account?

Answer 1

Answer: 8.76%

Explanation:

The formula to find the simple interest is given by :-

`I=Prt`, where P is the principal amount, r is rate of interest () in decimal and t is the time ( in years). (1)

Given : Justin deposited $2,000 into an account 5 years ago.

i.e. P = $2,000 , t= 5 years

He has just withdrawn $2,876. i.e. Future value = $2,876

Interest (I)=$2,876-$2,000=$876 [Subtract Principal value from Future value]

Substitute all the above values of P , t , and I in the formula (1) , we get

`876 =(2000)r(5)\\\\\Rightarrow\ r=(876 )/(2000*5)\\\\\Rightarrow r=(876)/(10000)=0.0876`

In percent ,
`r=0.0876*100=8.76\%`

Hence, the rate of interest = 8.76%