Question

At what rate does a payment plan for $1,500 accumulate $450 interest after 6 years?

Answer 1

Answer:

At a rate of 5%.

Step-by-step explanation:

This is a simple interest problem.

The simple interest formula is given by:

$E = P*I*t$

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

In this question:

Payment plan for $1500 means that $P = 1500$

$450 interest after 6 years means that $E = 450, t = 6$

We have to find the rate I. So

$E = P*I*t$

$450 = 1500*I*6$

$I = \frac{450}{1500*6}$

$I = 0.05$

At a rate of 5%.