Simple Interst

Question

Luke puts $4800 in a savings account.  He earns $96.00 each month for the next 60 months.  Find the simple interest rate for his savings account.

 

Is the answer 20%?

Answer 1

it actually ends up being 24% for the rate instead of 20% once you solve!

in order to solve this one you want to first find the Total Interest

Total Interest = $96 x 60 = $5,760

then we're solving the equation

I = PRT

R = I / PT = 5760 / (4800 *5) = 5760 / 24000 = 0.24 x 100% = 24%

meaning that the simple interest rate for the savings account here is 24%

Answer 2

Hello Conny,

 

The equation for calculating interest is:

 

Interest = Principal x rate x time or  I = P x r x t

 

For this problem:

 

I = $96.00/month x 60 months = $5760

P = $4800

r = ?

t = 60 months

 

So problem set up should look like this:

 

$5760 = $4800 x r x 60 months

 

r = ($5760)/($4800 x 60 months) = ($5760)/($288000 x months)

 

r = 0.02/month

 

To convert the rate from a decimal to a percent, multiply by 100 to get 2.0%/month.

 

Hope that helps and please let me know if you have any questions.

 

~kristy