Question

over the last 4 years michael has earned $240 interest on an initial investment of $2,000. what simple annual interest rate is the bank paying on this account

Answer 1

.03 or 3%.

Explanation:

Important:

I = interest

P = principal (investment)

R = simple interest rate

T = years

Formula: I = PRT

Given:

I = $240

P = 2000

T = 4 years

R = ?

Plug into formula:

240 = 2000(R)4

Multiply right side 2000*4

240 = 8000R

Divide both sides by 8000.

R = 240/8000

R = .03

The simple annual interest rate was .03 or 3%.

Therefore it .03 or 3%