Question

14. Luis placed $4500 in a certificate of deposit. He earns $20 each month

for the next 36 months. Find the annual simple interest rate for the
certificate of deposit.

Answer 1

The annual simple interest rate for the certificate of deposit is 5.33%

Explanation:

Given as :

The amount of money which Luis deposit = P = $ 4500

The time period for deposit = 36 months = T = 3 years

Let The rate of simple interest for deposit = r %

The interest which he earn each month for next 36 months = $ 20

I,e The interest which he earn = SI = $20 × 36 = $720

Now, From Simple Interest method

Simple Interest =
`(\textrm Principal* \textrm rate* \textrm time)/(100)`

or, SI =
`(\textrm P* \textrm r* \textrm t)/(100)`

Or, $ 720 =
`(\textrm $ 4500* \textrm r* \textrm 3)/(100)`

Or, $ 720 =
`(13500* r)/(100)`

Or, 720 = 135 r

∴ r =
`(720)/(135)`

I.e r = 5.33 %

So, The rate of simple interest for deposit = 5.33 %

Hence The annual simple interest rate for the certificate of deposit is 5.33% Answer