Question

Sam estimates that it will cost $26,000 to buy his son a car in 16 years. He currently has $5,500 to deposit in an account. What simple interest rate must his account have to reach the $26,000 balance in 16 years? Write as a percent and round to the hundredths place.

Answer 1

The percentage to the nearest hundredth is 19.23%

Explanation:

Mathematically;

simple interest = PRT/100

In this case

Simple interest is 26,000-5,500 = $20,500

P is $5,500

R is ?

T is 16 years

Thus;

20,500 = (5,000 * R * 26)/100

(100 * 20,500) = 130,000R

2,500,000 = 130,000R

R = 2,500,000/130,000

R = 19.231% which to the nearest hundredth is 19.23%