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Example 5: You invest $25 000 into a simple interest Canada Savings Bond that pays interest annually.

a) If the future value is $29 375 at the end of the five years, what was the interest rate?

1 Answer

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Answer:

3.5%

Explanation:

Use the future value for simple interest equation:


FV=p(1+rt)\\29375=25000(1+5r)\\1.175=1+5r\\5r=0.175\\r=0.035

The interest rate was 0.035 (or 3.5%).

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