Question

2. Big Money Bank has an offer for new customers: if you deposit

$5,000 in a savings account, you will earn 6.5% simple interest
over the first 10 years.
C. At the town savings bank a new customer earns $2950 in simple interest on a $5000 deposit over the first 10 years what rate of interest does that bank pay

Answer 1

We can use the simple interest formula to find the rate of interest that the town savings bank pays:

Simple Interest = Principal x Rate x Time

where Principal is the initial deposit, Rate is the interest rate, and Time is the time period.

We know that the Principal is $5000, the Simple Interest earned over the first 10 years is $2950, and the Time is 10 years. Substituting these values into the formula, we get:

$2950 = $5000 x Rate x 10

Simplifying the equation, we get:

Rate = $2950 / ($5000 x 10)

Rate = 0.059 or 5.9%

Therefore, the town savings bank pays an interest rate of 5.9% on its savings accounts.