You put $5000 in an account. The account earns $2250 simple interest in 10 years. What is the annual interest rate?
Answer:
4.5%.
Step-by-step explanation:
We have been given that you put $5000 in an account. The account earns $2250 simple interest in 10 years.
To find the annual interest rate we will use simple interest formula.
\(I=Prt\), where,
I = Amount of interest after t years,
P = Principal amount,
r = Annual interest rate in decimal form,
t = Time in years.
Upon substituting our given values in simple interest formula we will get,
\(2250=5000r*10)\)
\(2250=50000r\)
Let us divide both sides of our equation by 50000.
\(\frac{2250}{50000}=\frac{50000r}{50000}\)
\(0.045=r\)
Let us multiply our rate by 100 to get our annual interest rate as percentage.
\(0.045\times 100=4.5\%\)
Therefore, the annual interest rate is 4.5%.