Question

Use the formula for simple interest to find the interest rate if a deposit of $1400 earned $490 of interest after 5 years,

Answer 1

Given the simple interest formula:

I = P•R•T

where:
I = interest
P = principal
R = interest rate
T = time (in years)

We can isolate R algebraically to find out the interest rate:

I = P•R•T

Divide both sides by P•T:

I / (P•T) = (P•R•T)/(P•T)

The formula for the interest rate is:
R = I / (P•T)

Substitute the given values into this formula to solve for the interest rate (R):

R = I / (P•T)

R = $490/ ($1,400 • 5 years)
R = $490 / $7,000
R = 0.07 or 7%

Therefore, the interest rate is 7%.

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