Question

You put $6000 in an account. The account earns $1050 simple interest in 5 years. What is the annual interest rate?

Answer 1

1050 divided by 5 =210$ birr per year

Answer 2

The annual interest rate is: 3.5%.

The formula for simple interest is:

`\[ I = P \cdot r \cdot t \]`

where:

- I is the interest earned,

- P is the principal amount (initial investment),

- r is the annual interest rate, and

- t is the time in years.

In this case:

- P = $6000,

- I = $1050,

- t = 5 years.

We can rearrange the formula to solve for the interest rate r:

`\[ r = (I)/(P \cdot t) \]`

Substitute the given values:

`\[ r = ($1050)/($6000 \cdot 5) \]`

Calculate:

`\[ r = ($1050)/($30000) \]`

`\[ r = 0.035 \]`

Now, convert the decimal to a percentage by multiplying by 100:

`\[ r = 0.035 * 100 \]`

`\[ r = 3.5\% \]`

Therefore, the annual interest rate is 3.5%.