Question

Amanda invested $6000 in a fund for 3years and was paid simple interest. The total interest that she received on the investment was $720.As a percentage, what was the annual interest rate of her investment

Answer 1

ANSWER

4%

EXPLANATION

The simple interest formula is,

$i=P\times r\times t$

Where

• i: interest accumulated

,

• P: the principal amount

,

• r: annual interest rate

,

• t: time in years

For this problem, we are given the principal amount P = 6000, the time t = 3 and the interest accumulated i = 720. We have to find r,

$720=6000\cdot3\cdot r$

Solving for r,

$r=\frac{720}{6000\cdot3}=\frac{720}{18000}=0.04$

To express it as a percentage we just have to multiply the result by 100,

$r=0.04\times100=4\text{ \%}$

The annual interest rate of her investment was 4%.