Percent interest

Question

Jane has a savings account that has increased in value over a 12 month period from $8765 to $9006.04. What annual percent interest did she make during this period?

Answer 1

Apply the formula Interest(earned) = Principle(starting amount)*Rate*Time

 

Or: I=PRT

 

Start by listing the knowns!

(P) Principle = $8765

(I) Interest earned is the final amount minus the starting amount = 9006.04-8765 = 241.04

(T) Time here is in some period of time.  It is 12 month period, and an Anual percent, so the period of 1 works out.

 

List the unknown!

(R) Annual percent interest.  AKA the 'rate', or R in the formula

 

Sub these in to the formula above:

=x

Typically rates are reported as percentages, so multiply that by 100:

 

x%

 

If you wanted to check you can use that as a rate in the I=PRT formula to ensure you arrive back at the interest earned, or see what she will make in 5 years by changing T from 1 to 5!