Question

Find the rate if a principal of $1,800 earned $378 interest in 6 years

Answer 1

Interest rate (r ) = 0.035 or 3.5%

Explanation:

Given the principal amount of $1,800, and an interest payment of $378 earned in 6 years:

Use the simple interest formula and algebraically solve for variable, interest rate, r :

I = P × r × t

Where:

I = interest payment = $378

P = principal amount = $1,800

t = time (in years) = 6

r = interest rate

Divide both sides by P × t to isolate r :

`\displaytext\sf{(I)/(P\:*\:t)\:=\:(P\:*\:r\:*\:t)/(P\:*\:t)}`

`\displaytext\sf{interest\:rate\:(r)\:=\:(I)/(P\:*\:t)}`

Substitute the given values into the formula for the interest rate:

`\displaytext\sf{interest\:rate\:(r)\:=\:(378)/(1800\:*\:6)\:=\:(378)/(10800)}`

Interest rate (r ) = 0.035 or 3.5%

Therefore, the interest rate is 3.5%.