Question

If you wanted to make $501 by investing $3692 ofor 7 years in an account that pays simple interest, what interest rate you would need to achieve your goal?

Answer 1

The formula for simple interest is:

`i=\text{Prt}`

Where

i is the interest amount

P is the initial amount invested

r is the rate of interest [in years]

t is the time period [in years]

We are given

i = 501 [wants to achieve interest of 501 dollars\

P = 3692

r is what we need to figure out

t is 7

Substituting, we get:

`\begin{gathered} i=\text{Prt} \\ 501=3692(r)(7) \\ r=(501)/(3692*7) \\ r=0.019385 \end{gathered}`

Mulitplying by 100, we get the percentage interest rate.

0.019385 * 100 = 1.94%