Question

You invest in $5,000 in an account earning simple interests. The balance after 6 years is $6,200. What is the interests rate?

Answer 1

The interest rate is 4% per annum.

Explanation:

Let the interest rate that I am getting is r% per annum.

So, my $5000 investment becomes $6200 after getting r% simple interest for 6 years.

So, from formula of simple interest we can write

`6200 = 5000(1 +(rt)/(100))`

⇒
`1.24 = 1 + (6r)/(100)`

⇒
`(6r)/(100) = 0.24`

⇒ r = 4%

Therefore, the interest rate is 4% per annum. (Answer)