Simple Interest

Question

If you deposit $157 in a simple interest account that has a balance of $158.05 after 3 months, what is the annual simple interest rate?

Answer 1

Hello, Paula from Oklahoma

 

We need to use the formula I=prt, I is the money you made in interest or the money you owe in interest

                                                  p is the amount you deposited or borrowed

                                                  r is the interest rate expressed as a decimal

                                                  t is time, but it must be expressed in terms of years. 

 

So, I in this case is 158.05-157= 1.05 .  This is the amount of money that you made in interest.  So, we are going to use the following number in the formula I=prt

I=1.05, p=157, t= .25 (three months is a quarter of a year).  We are looking for r.

 

I= p r t

1.05= (157)(r)(.25)       substituting into the formula

1.05= 39.25r                multiplying

0.02675=r                    dividing by 39.25

  .0268 =r                     Rounding ten thousandths place value.  This is a decimal.

     2.68 %                    Multiply the decimal by 100 to make it into a percentage.

 

That's a lot.  My account pays 1/2 %.

 

Hope this helps.  Don't forget to rate my answer :)

 

D. Y. T.