Question

If the simple interest on 5,000 for 2 years is $500, then what is the interest rate?

Answer 1

Interest rate = 5% (or) 0.05

Explanation:

Now we have to,

→ find the required interest rate.

Formula we use,

→ I = P × R × T

→ PRT = I

→ R = I/PT

Then the interest rate will be,

→ R = I/PT

→ R = $500 ÷ ($5000 × 2 years)

→ R = 500/(5000 × 2)

→ R = 500/10000

→ R = 0.05 × (100)

→ [ R = 5% ]

Hence, the interest rate is 5%.

Answer 2

5%

Explanation:

`\boxed{\begin{minipage}{7 cm}\underline{Simple Interest Formula}\\\\$ I = Prt$\\\\where:\\\\ \phantom{ww}$\bullet$ $I =$ interest \\ \phantom{ww}$\bullet$ $P =$ principal amount \\ \phantom{ww}$\bullet$ $r =$ interest rate (in decimal form) \\ \phantom{ww}$\bullet$ $t =$ time (in years) \\ \end{minipage}}`

Given:

• I = $500
• P = $5,000
• t = 2 years

Substitute the given values into the simple interest formula and solve for r:

`\implies 500=5000 \cdot r \cdot 2`

`\implies 500=10000r`

`\implies r=(500)/(10000)`

`\implies r=0.05`

`\implies r=5\%`

Therefore, the interest rate is 5%.