Question

Using the solution from the previous question, solve the following problem. Suppose that the amount of money originally invested in an account was $5,000, and that the money in the account after 3 years is $6,050. What was the annual simple interest rate for the account?

Answer 1

Let's use the simple interest formula:

`FV=PV\cdot r\cdot t`

Where:

FV = Future value = $6050

PV = Present value = $5000

r = interest rate

t = time = 3

Replacing the data into the equation:

`\begin{gathered} 6050=5000\cdot r\cdot3 \\ 6050=15000r \\ \text{Solving for r:} \\ (6050)/(15000)=r \\ \\ r\approx0.4033\approx40.33 \end{gathered}`

r = 40.33%