Question

A student has $1500 to deposit in a savings account. What is the lowest rate that would allow the student to earn $95 in simple interest in a year?

Answer 1

6 1/3% Since we're dealing with simple interest and not compound interest and because we're dealing with exactly 1 year, all that we need to do is calculate what percentage of $1500 is $95. So just divide 95 by 1500. 95 / 1500 = 0.06333 = 6 1/3% So the student requires an interest rate 6 1/3% to earn $95 after one year after an initial deposit of $1500.