Question

Ethan invested £500 in the bank for 2 years. he earned £40 simple interest in total. what was the simple interest rate per annum

Answer 1

The formula is
I=prt
I interest earned 40
P principle 500
R interest rate?
T time 2 years
Solve the formula for r by dividing both sides by pt to get
R=I/pt
R=40÷(500×2)
R=0.04×100
R=4%

Hope it helps!

Answer 2

4%.

Explanation:

We have been given that Ethan invested £500 in the bank for 2 years. He earned £40 simple interest in total. We are asked to find the annual interest rate.

We will use simple interest formula to solve our given problem.

`I=Prt`, where,

I = Amount of interest,

P = Principal amount,

r = Annual interest rate in decimal form,

t = Time in years.

Upon substituting our given values in above formula, we will get:

`40=500*r*2`

`40=1000*r`

Now, we will divide both sides of our given equation by 100.

`(40)/(1000)=(1000*r)/(1000)`

`(4)/(100)=r`

`(1)/(25)=r`

`0.04=r`

Since our given interest rate is in decimal form, so we need to convert it in percentage.

`0.04* 100\%=4\%`

Therefore, the simple interest rate per annum is 4%.