Question

after three months, $2,080 deposited in a savings account with simple interest had grown to a total of $2,111.20. what was the interest rate

Answer 1

The simple interest is given by:

`\begin{gathered} I=PV\cdot r\cdot t \\ PV=\text{Present value} \\ r=\text{interest rate} \\ t=\text{time (in years)} \end{gathered}`

Let's make a conversion first:

`3months*(1year)/(12months)=(1)/(4)year=0.25year`
`\begin{gathered} t=0.25 \\ PV=2080 \\ I=2111.2 \\ \text{ Replace the data into the formula:} \\ 2111.2=2080\cdot0.25\cdot r \\ \text{solve for r:} \\ r=(2111.2)/(520) \\ r=4.06 \end{gathered}`

Answer:

4.06%