Cheryl investment

Question

If Cheryl invested $9500 in a 6 year term deposit and at maturity the investment was worth $11300 , what was the annual rate of simple interest her investment earned?

Answer 1

 

Simple interest formula is ...

 

   I   = Prt   .... P = principal, r = rate, t = time in years

 

She initially invested 9500. The interest earned for the 6 year period is 11300 - 9500 ... which is 1800

 

   1800 = 9500 • r • 6

 

   1800 ÷ (9500 • 6) = r

 

   r = 1800 ÷ 5700

 

   r = .03158

 

   r = 3.158%