Question

Mai invested $5000 in a fund for 2 years and was paid simple interest. The total interest that she received on the investment was $400. As a percentage, what

was the annual interest rate of her investment?
If necessary, refer to the list of financial formulas.

Answer 1

To find the annual interest rate, we use the simple interest formula. After substituting the given values into the formula, we determine that Mai's investment had an annual interest rate of 4%.

Step-by-step explanation:

The question asks to determine the annual interest rate of an investment from a known amount of simple interest received. To find the annual interest rate, we can use the simple interest formula I = PRT, where I is the interest received, P is the principal amount, R is the rate of interest per year, and T is the time in years. Mai received $400 in interest after investing $5000 for 2 years.

First, we rewrite the simple interest formula to solve for R, the interest rate:

R = I / (PT)

Plugging in the given values, we calculate R as follows:

• R = $400 / ($5000 × 2)
• R = $400 / $10,000
• R = 0.04
• R = 4%

Therefore, the annual interest rate of her investment was 4%.