Luke puts $4800 in a savings account. He earns $16 each month for the next 60 months. Find the simple interest rate for his savings account.

Question

The answer is 4%, how???

Answer 1

$16 interest each month * 60 months = $960 of interest earned

That means each year, he earned $960 / 5 = $192 of interest

Simple interest is found by dividing the yearly interest by the original dollar amount in the bank

So $192 / $4800 = .04 or 4%.

It really doesn't matter that it said 60 months. We could have skipped the 1st step and just done $16 * 12 = $192 b/c we only care about the yearly interest earned to calculate simple interest.