Question

Elaina started a savings account with $3,000. The account earned $10 each month in interest over a 5-year period. Find the interest rate.

a) 2%
b) 3%
c) 4%
d) 5%

Answer 1

To find Elaina's account's interest rate, the total interest of $600 over 5 years was divided by the product of the principal ($3,000) and the time (5 years), resulting in a rate of 0.04, or 4%.

Step-by-step explanation:

Elaina started a savings account with $3,000 and the account earned $10 each month in interest over a 5-year period. To find the interest rate, let's calculate the total interest earned over the 5 years. With $10 earned per month, over 60 months (5 years), the total interest is 60 months × $10/month = $600.

Now, we can use the formula for simple interest: Interest = Principal × Rate × Time, where interest is $600, the principal (initial amount) is $3,000, and the time is 5 years. We need to find the rate (annual interest rate).

Plugging in the values we get: $600 = $3,000 × Rate × 5. To solve for the rate, we divide $600 by the product of principal and time, which gives us Rate = $600 / ($3,000 × 5) = 0.04 or 4%. Therefore, the interest rate is 4%, which corresponds to option (c).