Question

Willie deposited $2500 into a savings account for which simple interest is calculated semiannually. If his $2500 grew to $2540 after 6 months, what is the yearly interest rate on Willie's account?

A. 1.6%
B. 0.16%
C. 3.2%
D. 0.32%

Answer 1

The yearly interest rate on Willie's savings account is 1.6% (Option A).

Step-by-step explanation:

To find the yearly interest rate on Willie's savings account, we can use the formula for simple interest: Interest = Principal × Rate × Time. In this case, the principal is $2500, the interest is $40 ($2540 - $2500), and the time is 1 year. Plugging these values into the formula, we get:

$40 = $2500 × Rate × 1

To solve for the rate, we divide both sides of the equation by $2500:

Rate = $40 ÷ $2500

Rate ≈ 0.016, or 1.6%

Therefore, the yearly interest rate on Willie's account is 1.6% (Option A).