Question

If mary deposited $950 in a savings account. It earned a total of $195 in simple interest over three years. What was the simple interest rate on Mary's savings account?

Answer 1

In order to find the simple interest rate we will follow the formula:

                                                I = Prt  or r = I/Pt

( the / represents division for this formula). You can use either formula to find the answer. I'll do both for you to see and determine for the future which is most easy for you.

Let's define what the letters of the formula mean (both formulas have the same meaning for the letters).--in parenthesis I will put the numbers that we'll use for each letter, also.

r = the interest rate that we need to find (this is what we will solve for)

I = how much interest that was made through the time frame. ($195)

P = the Principal amount. ($500)

t = the amount of time of accruement. (3)

Let's begin plugging in our numbers into the first formula I = Prt.

195 = (500) (r) (3)

Multiply your numbers behind the equal sign.

500 x 3 = 1500

We're left with

195 = 1500r

Now we'll divide:

195 ÷ 1500= 0.13

This will be our interest but we have to turn it into a percentage. To turn the decimal into a percentage we'll move our decimal two places to the right. That leaves us with 13.0

Therefore, the simple interest is 13%.

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The second formula solving: r = I/Pt

Plug your numbers into your formula just like before.

r = 195 / 500(3)

Multiply 500 x 3 = 1500

195/1500 = .013

We'll turn it into a percentage which again, will give us 13% simple interest.