Question

At the Town Savings Bank, a new customer earns $2,950 in simple interest on a $5,000 deposit over the first 10 years. What rate of interest does that bank pay?

Answer 1

9514 1404 393

Answer:

5.9%

Explanation:

The interest rate formula is useful:

I = Prt . . . . interest on amount P at rate r for t years

2950 = 5000·r·10

r = 2950/50000 = 0.059 = 5.9%

The bank pays 5.9% interest.