Question

Justin deposited $2,000 into an account 5 years ago. Simple interest was paid on the account. He has just withdrawn $2,876. What interest rate did he earn on the account?

Answer 1

Answer: 8.76%

Step-by-step explanation:

The formula to find the simple interest is given by :-

$I=Prt$, where P is the principal amount, r is rate of interest () in decimal and t is the time ( in years).   (1)

Given : Justin deposited $2,000 into an account 5 years ago.

i.e. P = $2,000 ,  t= 5 years

He has just withdrawn $2,876. i.e. Future value = $2,876

Interest (I)=$2,876-$2,000=$876  [Subtract Principal value from Future value]

Substitute all the above values of P , t , and I in the formula (1) , we get

$876 =(2000)r(5)\\\\\Rightarrow\ r=\dfrac{876 }{2000\times5}\\\\\Rightarrow r=\dfrac{876}{10000}=0.0876$

In percent , $r=0.0876\times100=8.76\%$

Hence, the rate of interest = 8.76%