Question

If roe invests $2,500 for 4 years and earns $700 in interest, what is the rate (as a percent)

Answer 1

By using the simple interest formula I = PRT, it is determined that Roe's investment had an interest rate of 7% over the 4 years to earn $700 on a $2,500 investment.

Step-by-step explanation:

If Roe invests $2,500 for 4 years and earns $700 in interest, to find the rate we can use the simple interest formula: I = PRT, where I is interest, P is principal, R is rate, and T is time. Plugging in the values we get 700 = 2500 × R × 4. Solving for R, we get R = 700 / (2500 × 4). After calculation, the rate comes out to be 0.07 or 7%.

This problem demonstrates how the power of compound interest can contribute to investment growth, although in this case we used a simple interest calculation since the problem did not specify compounding.