Question

On July 1, 1990, John invested $300 in an account that earned 8% simple interest. On July 1, 1993 he closed this account and deposited the liquidated funds in a new account earning q% simple discount. On July 1, 1998, John had a balance of $520 in the simple discount account. How much interest did he earn between July 1, 1993 and July 1, 1994?

Answer 1

Answer:

q =5.7%          $21.204

Explanation:

The simple interest formula is

I = $\frac{P*R*T}{100}$

Given that

I = Interest , T = time ; ;R is rate ; P = principal

The amount of Interest that John earned by July 1, 1993 is,

           I = $\frac{300*1* 8}{100}$ = 72

Thus, the total amount in the account by July 1 1993

= $300 + $72= $372

We understand that he deposited this amount to earn interest  at  q rate

On July 1, 1998, John received $520. This means that his interest in the five years = $520-$372 = $148

Using the simple interest formula,

Interest  = PRT/100

148 = $\frac{520*5*q }{100}$

       = 14,800 =2600q

       q = $\frac{14,800}{2,600}$

                 q = 5.69231%

Thus, rate = 5.7%

The interest that John earned between July 1, 1993 and July 1,1994 can be worked as

    I = $\frac{PRT}{100} = \frac{372*5.7*1}{100}$

          = $21.204