Using simple interest, it is found that the rate is of 0.1205 = 12.05%.
The amount of money earned in simple interest after t years is given by:
\(I = Pit\)
In which:
- P is the principal, which is the initial deposit.
- r is the interest rate, as a decimal.
In this problem, we have that:
- The interest earned is \(I = 160.67\)
- The principal is \(P = 2000\).
- The time is of 8 months, it should be in years, hence \(t = \frac{8}{12} = \frac{2}{3}\)
Then:
\(I = Pit\)
\(160.67 = 2000\frac{2}{3}i\)
\(i = \frac{160.67 \times 3}{4000}\)
\(i = 0.1205\)
The rate is of 0.1205 = 12.05%.
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