Question

April deposited $500 in savings account earning simple interest. She made no other deposits or withdrawals. After 3 years, the account is worth $533.75. What is the interest rate on the account?

Answer 1

Answer: the interest rate on the account is 2.25%

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the amount deposited.

P represents the principal or amount deposited

R represents interest rate

T represents the duration in years.

From the information given,

P = $500

T = 3 years

Total balance = $533.75

I = 533.75 - 500 = $33.75

Therefore,

33.75 = (500 × R × 3)/100

33.75 = 15R

R = 33.75/15

R = 2.25%