Question

Find the effective rate of interest to the nearest hundredth percent if $60.94 is earned in one year on a deposit of

$975.

Answer 1

6.25%

Step-by-step explanation:

The formula for calculating interest rate is as follows

I= P x R x T

Where

I= interest, P= principal amount, T is time

in this case: I= $60.94, P=$975, T=1 year

Therefore:

$60.94 = $975 x( r/100) x 1

$60.94 =975(r/100) multiply both side by 100 to get rid of the fraction.

6094=975r

r = 6094/ 975

r = 6.2502

interest rate = 6.25%