Question

You are offered an investment that pays simple interest and will earn $200 interest on a $2000 investment over 5 years. What interest rate is the investment paying? A) 1.5% B) 2% C) 2.5% D) 3%

Answer 1

B) 2%

Explanation:

The simple interest formula is ...

I = Prt

Interest I is earned on principal P when it is invested at rate r for t years.

Filling in the given values, we can solve for r:

200 = 2000r(5)

200/10000 = r = 2/100 = 2%

The interest rate is 2%.