Find the rate

Question

When Josh was 10 years old, his godfather bought him a $5000 CSB that earned simple interest. When josh turned 20 years old the CSB was worth $9000. At what rate did the CSB earn annual interest?

anwser: 8%

 

~ can't find the way to do it 

Answer 1

To find the annual interest rate, use the simple interest formula:

{Interest} = {Principal} * {Rate} * {Time}

Principal (P) = $5,000

Final Value = $9,000

Time (T) = 20-10 = 10 years

Interest earned = $9,000 - $5,000 = $4,000

Plug into formula

4,000 = 5,000 * R * 10

4,000 = 50,000R

R = 4,000/50,000 = 0.08

Answer = 8% annual interest rate