Question

Taylor opened a savings account with $425. After 2 years, the total interest earned was $10.20. What was the annual interest rate?

Answer 1

R = 1.2%

Explanation:

Given the following data;

Principal = 425

Time = 2

Simple interest = 10.20

To find the annual interest rate;

Mathematically, simple interest is calculated using this formula;

`S.I = \frac {PRT}{100}`

Where;

• S.I is simple interest.
• P is the principal.
• R is the interest rate.
• T is the time.

Substituting into the equation, we have;

`10.20 = \frac {425*R*2}{100}`

`10.20 = \frac {850R}{100}`

Cross-multiplying, we have;

`1020 = 850R`

`R = \frac {1020}{850}`

R = 1.2%

Therefore, the annual interest rate is 1.2 percent.