Question

Mrs. Goerlich deposited $2,000 into a savings account to save for her son's college tuition. • The account earns simple interest. • She did not make any additional deposits or withdrawals. • At the end of 6 years, the account has a balance of $2,780. What is the annual interest rate on this account?

Answer 1

Answer: 6.5%

Explanation:

In 6 years the interest earned is:

= 2,780 - 2,000

= $780

The account earns simple interest which means that it increased by the same rate yearly. Yearly increase is:

= 780/6

= $130

Simple interest rate = Interest payment/ Deposit

= 130/2,000

= 6.5%