Question

If money is invested for a short period of time, simple interest is paid using the following formula.

I = Prt

P is the money invested, or principal amount, r is the simple interest rate, and t is the time, in years, the money is invested.

Given P = $2,000, t = 2 years, and I = $280, what is the simple interest rate?

A. 7%

B. 0.7%

C. 8%

D. 0.07%

Answer 1

A. 7%

Explanation:

Given the following data;

Principal, P = $2,000

Time, T = 2 years

Simple Interest, I = $280

To find the simple interest rate, R?

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;

`280 = \frac {2000*R*2}{100}`

Cross-multiplying, we have;

`280 * 100 = 4000*R`

`28000 = 4000R`

`R = \frac {28000}{4000}`

Simple interest rate, R = 7%