Question

£13,000 was deposited in a savings account that pays simple interest. After 15 years, the account contains £19,825. Work out the annual interest rate of the account.

Answer 1

To find the annual interest rate of a savings account, we can use the formula for simple interest. In this case, the annual interest rate is approximately 3.5%.

Step-by-step explanation:

To calculate the annual interest rate of a savings account, we need to use the formula for simple interest: I = P * r * t, where I is the interest, P is the principal amount deposited, r is the annual interest rate, and t is the time in years. In this case, we have £13,000 deposited for 15 years, and the final amount is £19,825. We can use these values to find the interest: £19,825 - £13,000 = £6,825.

Now, we can plug in the values into the formula to find the annual interest rate:

£6,825 = £13,000 * r * 15

Dividing both sides by £13,000 * 15, we get:

r = £6,825 / (£13,000 * 15)

Calculating this gives us r ≈ 0.035.

Finally, we multiply r by 100 to express it as a percentage:

Annual interest rate = 0.035 * 100 ≈ 3.5%