Answer:
0.0625/year or 6.25%/year
Explanation:
Simple interest formula:
- I = Prt
- where I = interest (final) amount, P = principal (initial) amount, r = interest rate, t = time (years)
We are given these values:
- I = $500
- P = $4000
- t = 2 years
We want to find r, the simple interest rate.
Substitute these known values into the formula.
- I = Prt
- 500 = (4000) × r × (2)
- 500 = 8000r
- 0.0625 = r
The simple interest rate is 0.0625, aka 6.25% per year.