Question

Billy invests £800 for 5 years in a savings account.

By the end of the 5 years he has received a total of £96 simple interest.
Work out the annual rate of simple interest.

Answer 1

2.4%

Explanation:

Simple interest (I) is calculated as

I =
`(PRT)/(100)`

where P is the principal, R the rate of interest and T time in years

Here I = 96, P = 800 and T = 5, thus

96 =
`(800R(5))/(100)` =
`(4000R)/(100)` = 40R ( divide both sides by 40 )

R =
`(96)/(40)` = 2.4%