Question

Claire deposited $2,500 into an account that accrues interest monthly. She made no additional deposits or withdrawals. After 2 years, Claire had $2,762.35 in the account. What is the annual interest rate of the account?

Answer 1

R = 5.2476%/year

Equation:
r = (1/t)(A/P - 1)
Calculation:
Putting time into years for simplicity,
24 months ÷ 12 months/year = 2 years,

Solving our equation
r = (1/24)((2762.35/2500) - 1) = 0.0043725
r = 0.0043725
converting r decimal to a percentage
R = 0.0043725 * 100 = 0.4373%/year

The interest rate required to get
a total amount, principal plus interest, of $ 2,762.35
from simple interest on a principal of $ 2,500.00
over 2 years (24 months) is 0.4373% per month or 5.2476% per year.