Question

Martina invested 8,000 in a fund for 3 years and was paid simple interest. The total interest that she received on the investment was 720. As a percentage, what was the annual interest rate of her investment?

1) 3.7%
2) 0.03%
3) 3%
4) 240%

Answer 1

Using the simple interest formula I = PRT, where I is the interest of $720, P is the principal amount of $8,000, and T is the time of 3 years, we calculate the annual interest rate R to be 3%.

Step-by-step explanation:

The question asks us to determine the annual interest rate of an investment based on the simple interest formula. Martina received $720 of simple interest from investing $8,000 for 3 years. The formula for simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years.

With these values, we can find R by rearranging the formula to R = I / (PT). Substituting in the values we have R = $720 / ($8,000 × 3) = $720 / $24,000 = 0.03. To express this as a percentage, we multiply by 100, resulting in an annual interest rate of 3%.