Question

Megan Hughes deposits $3,500 in an account that pays simple interest. When she withdraws her money 6 months later, she receives $3,692.50. What rate of interest did the account pay? Round to the nearest whole percentOA 13% per yearOB 10% per yearOC 12% per yearOD 115 per year

Answer 1

We are given the following information

Deposited amount = $3,500

Final amount = $3,692.50

Number of years = 6/12 = 0.5

We are asked to find out what interest did the account pay?

Recall that the simple interest formula is given by

`A=P(1+rt)`

Let us substitute all the known values and solve for interest rate (r)

`\begin{gathered} 3,692.50=3,500(1+0.5r) \\ (3,692.50)/(3,500)=1+0.5r \\ 1.055=1+0.5r \\ 0.5r=1.055-1 \\ 0.5r=0.055 \\ r=(0.055)/(0.5) \\ r=0.11*100\% \\ r=11\% \end{gathered}`

Therefore, the interest rate is 11% per year.