Question

Find the annual interest rate.

Answer 1

The annual interest rate is 3.5%.

Solution:

Given Interest (I) = $26.25

Principal (P) = $500

Time (t) = 18 months

Rate of interest (r) = ?

Time must be in years to find the rate per annum.

1 year = 12 months

Divide the time by 12.

Time (t) = $\frac{18}{12}=\frac{3}{2}$ years

Now, find the rate of interest using simple interest formula.

Simple interest formula:

$I=\frac{Prt}{100}$

$26.25=\frac{500\times r\times \frac{3}{2} }{100}$

$26.25\times 100 =500\times r\times \frac{3}{2}$

$2625 =250\times r\times 3$

$2625 =750\times r$

$\Rightarrow r=\frac{2625}{750}$

⇒ r = 3.5%

Hence the annual interest rate is 3.5%.