Question

after three months, $2,080 deposited in a savings account with simple interest had grown to a total of $2,111.20. what was the interest rate

Answer 1

The simple interest is given by:

$\begin{gathered} I=PV\cdot r\cdot t \\ PV=\text{Present value} \\ r=\text{interest rate} \\ t=\text{time (in years)} \end{gathered}$

Let's make a conversion first:

$3months\times\frac{1year}{12months}=\frac{1}{4}year=0.25year$$\begin{gathered} t=0.25 \\ PV=2080 \\ I=2111.2 \\ \text{ Replace the data into the formula:} \\ 2111.2=2080\cdot0.25\cdot r \\ \text{solve for r:} \\ r=\frac{2111.2}{520} \\ r=4.06 \end{gathered}$

Answer:

4.06%