what is the annual rate of simple interest if an investment of $240 increases to $320 in 16 months is?

Question

what is the annual rate of simple interest if an investment of $240 increases to $320 in 16 months is?

 

Answer 1

If the investment value increases from $240 to $320, then the interest amount is $320 - $240 = $80.

Using the formula for simple interest, I = prt, where I is the interest amount, p is the principle, r is interest rate, and t is the time of the investment in years,

 

80 = 240(r)(16/12) .... 16/12 is the length of the investment in years

 

Simplifying:

80 = 20(r)(16) .... divided 240 by 12

80 = 320r .... multiplied 20 by 16

0.25 = r .... divided both sides of the equation by 320

 

The annual interest rate is 25%