what annual rate of interest would you have to earn on an investment of $3500 to ensure receiving $262.50 interest after 1 year?

Question

I do not understand how to set this problem up and how I would find the answer.

Answer 1

Hello, thank you for taking the time to post your question!

The underlying formula that you want to use here is

Interest = Principal x Rate x Time

Plugging in the values that we know from this question that becomes

262.50 = 3500 x Rate x 1

Rate = 262.50 / (3500 x 1) = 0.075

Meaning that the annual interest rate required is 7.5%

I hope that helps you get moving in a better direction on this type of question! Feel free to reach out if you have any additional questions beyond that :)

Answer 2

Interest = Principle * Rate * Time

 

Your Principle is 3500, Time is 1, and Interest is 262.50 

 

262.50 = 3500 * Rate * 1

 

Rate = 262.50 / 3500 = 0.075 = 7.5% per year