Question

Raul deposited $3000 into a bank account that earned simple interest each year. After 3.5 years, he had earned $262.50 in interest. No money was deposited into or withdrawn from the account.

What was the annual interest rate?

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Answer 1

The annual interest rate is 0.018, or 1.8%.

Explanation:

Let r be the annual interest rate, t be the number of years the money was in the account, and I be the amount of interest earned. Since the interest is simple interest, the amount of interest earned is given by the formula I = Prt, where P is the principal, or initial amount deposited. In this case, we know that P = $3000, t = 3.5 years, and I = $262.50. Substituting these values into the formula, we get:

262.50 = 3000r * 3.5

r = 0.018

Thus, the annual interest rate is 0.018, or 1.8%.