Question

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

R = 7%

Step-by-step explanation

We have that the amount invested in the account was $5000. That is the principal.

The amount after 3 years is $6050.

First, let us get the Simple Interest.

The interest is the amount in the account after the number of years minus the principal. That is:

I = 6050 - 5000

I = $1050

Simple Interest on a principal, P, at a rate R after T years is given as:

`I\text{ = }\frac{P\cdot\text{ R }\cdot\text{ T}}{100}`

We need to find rate R.

That is:

`\begin{gathered} 1050\text{ = }\frac{5000\cdot\text{ R }\cdot\text{ 3}}{100} \\ \Rightarrow\text{ 1050 }\cdot\text{ 100 = 15000 }\cdot\text{ R} \\ \Rightarrow\text{ R = }(105000)/(15000) \\ R\text{ = 7\%} \end{gathered}`

The annual simple interest rate is 7%