Question

After 7 years, Abner earned $1575 in simple interest from a CD into which he initially deposited $6000. What was the annual interest rate of the CD?

Answer 1

The answer is C. 3.75%

Answer 2

The annual interest rate of the CD was 3.75 %

Step-by-step explanation

Simple Interest formula is :
`I =P*r*t` , where
`I=` Amount of interest,
`P=` Principal/Initial amount,
`r=` rate of interest in decimal form and
`t=` time in years

Here Abner earned $1575 in simple interest and he initially deposited $6000. So,
`I=1575` dollar and
`P= 6000` dollar

Also given that,
`t = 7` years

Now according to the formula...

`I= P* r*t\\ \\ 1575= 6000*r*7\\ \\ 1575= 42000*r\\ \\ r= (1575)/(42000)= 0.0375`

For getting the interest rate in percentage, we will multiply it by 100%. So... (0.0375 × 100) % = 3.75 %

So, the annual interest rate of the CD was 3.75 %