Question

Jeremy is opening a savings account earning simple interest. He plans to deposit his $50 birthday money and leave the account alone until he goes to college. He will earn $5 per year in interest.

Answer 1

10%

Explanation:

Use the formula of simple interest:

`A=P(1+rt)`

We can determine the interest rate if he earns $5 a year. Which means after a year he will have $55. Let A be the final amount after year t with t=1:

`55=50(1+r(1))`

Solve for r, the interest rate:

`5=50r`

`r=5/50=0.1`

Jeremy will earn money in the firsts year at a interest rate of 10%