Question

If the simple interest on $4,000 for 9 years is $2,160, then what is the interest rate?

Answer 1

Simple interest

Initial explanation

We know that the formula for simple interest is:

$I=prt$

where,

I = Interest amount you earn

p = principal amount you deposit

r = interest rate per year in decimal

t = time in years

Interest rate

In this case, we want to find the interest rate, this is r.

We have that

I is $2,160

t is 9

p is $4,000

Then, using the equation we have:

$\begin{gathered} I=prt \\ \downarrow \\ 2,160=4,000\cdot r\cdot9 \\ 2,160=36,000\cdot r \end{gathered}$

Then, solving the equation for r, we have:

$\begin{gathered} 2,160=36,000\cdot r \\ \downarrow \\ \frac{2,160}{36,000}=r \\ 0.06=r \end{gathered}$

Then, the interest rate is

0.06 or

6% (0.06 · 100% = 6%)

Answer: r = 0.06