Question

After 7 years, Abner earned $1575 in simple interest from a CD into which he initially deposited $6000. What was the annual interest rate of the CD?

Answer 1

The annual interest rate of the CD was 3.75 %

Explanation

Simple Interest formula is : $I =P*r*t$ , where $I=$ Amount of interest, $P=$ Principal/Initial amount, $r=$ rate of interest in decimal form and $t=$ time in years

Here Abner earned $1575 in simple interest and he initially deposited $6000. So, $I=1575$ dollar and $P= 6000$ dollar

Also given that, $t = 7$ years

Now according to the formula...

$I= P* r*t\\ \\ 1575= 6000*r*7\\ \\ 1575= 42000*r\\ \\ r= \frac{1575}{42000}= 0.0375$

For getting the interest rate in percentage, we will multiply it by 100%. So... (0.0375 × 100) % = 3.75 %

So, the annual interest rate of the CD was 3.75 %

Answer 2

The answer is C. 3.75%