Question

You put $400 in an account. The account earns $32 simple interest in 2 years what is the annual interest rate?

Answer 1

Answer

4 %

Explanation

Given:

Principal, P = $400

Interest, I = $32

Time,T = 2 years

What to find:

Annual interest rate, R

Step-by step solution:

The simple interest formula is given by:

$I=\frac{\text{PRT}}{100}$

Substituting P = 400, I = 32, and T = 2 into the formula:

$\begin{gathered} 32=\frac{400\times R\times2}{100} \\ 800R=3200 \\ R=\frac{3200}{800} \\ R=4\text{ \%} \end{gathered}$