Question

Sir Ving Spoon earned $5,436 on his $7,550 certificate of deposit. If he had the CD for 12 years, what simple interest rate did the bank pay him?

Answer 1

6% or 0.06 is the simple interest rate the bank pays him.

Step-by-step explanation:

Sir Ving Spoon earned $5,436 on his $7,550 certificate of deposit.

From this given information,

It can be determined that the Principal amount is $7550 and the interest amount is $5436.

The CD is for 12 years. Therefore, the number of years is 12.

To find the interest rate (r) :

Using the simple interest formula,

Interest = P×r×t

where,

• P is the principal amount = $7550
• r is the rate of interest.
• t is the number of years = 12

⇒ 5436 = 7550 × r × 12

⇒ 5436 = 90600 × r

⇒ r = 5436 / 90600

⇒ r = 0.06

Multiply by 100 to represent in rate %

⇒ r = 0.06 × 100

⇒ r = 6%

∴ 6% or 0.06 is the simple interest rate the bank pays him.