Question

pam deposited $6,900 in a savings account with simple interest. Four months later she had earned $23 in interest. What was the interest rate?

Answer 1

1%

Explanation:

We use the simple interest equation of A=P(1+rt).

A-the total amount with interest earned

P-the initial amount or principal

r-rate

t-time in years

We substitute the values P=6900, A=6923, and t=0.33 since 4 months divided by 12 months is 0.333 years. We then solve for r.

`6923=6900(1+r(0.33))\\6923=6900(1+0.33r)\\(6923)/(6900) =(6900(1+0.33r))/(6900) \\1.0033=1+0.33r\\1.0033-1=1-1+0.33r\\0.0033=0.33r`

Our final step is to divide both sides by 0.33.

`(0.0033)/(0.33) =(0.33r)/(0.33) \\0.01=r`

This is the decimal of the rate. We convert to a percentage by multiplying by 100. 0.01(100)=1%.