Question

Mike put $1000 into a simple interest account for a year. He did not take any money out or add any money to the account. At the end of the year he had $1050 in the account. What was the annual percentage interest rate?

Answer 1

To find the annual percentage interest rate for Mike's $1000 deposit, we use the simple interest formula. After calculating the interest of $50 that Mike earned on his investment, we find that the annual percentage interest rate is 5%.

Step-by-step explanation:

To determine the annual percentage interest rate that Mike received on his $1000 deposit, we need to apply the simple interest formula.

Simple interest can be calculated using the formula I = P × r × t, where I is the interest earned, P is the principal amount (initial deposit), r is the annual interest rate in decimal form, and t is the time in years.

From the question, we know that Mike's initial deposit (P) is $1000, the time (t) the money was deposited for is 1 year, and the interest earned (I) is $1050 - $1000 = $50. We need to find the annual interest rate (r).

Using the formula, we have:
$50 = $1000 × r × 1

To solve for r, we divide both sides by $1000:

r = $50 / $1000

r = 0.05

To express the interest rate as a percentage, we multiply by 100:

r = 0.05 × 100

= 5%

Therefore, the annual percentage interest rate that Mike received on his account was 5%.