Question

Xavier opened a savings account with a deposit of $12,000. The account earned simple interest. He did not make any additional deposits or withdrawals. At the end of 3 years, the account balance was $12,324. What is the annual interest rate on this account? 0. 9% 1. 8% 2. 7% 3. 6%.

Answer 1

The annual interest rate on the saving account of Xavier which is earned simple interest is 9%.

What is simple interest?

Simple interest is the amount charged on the principal amount with a fixed rate of interest for a time period. Simple interest calculated only on the principal amount.

The formula for the simple interest can be given as,

$I=\dfrac{PRT}{100}$

Here, (I) is the interest amount on the principal amount of (P) with the rate of (r) in the time period of (t).

Xavier opened a savings account with a deposit of $12,000. At the end of 3 years, the account balance was $12,324.

The principal amount is $12000 and the total amount is $12324. Thus, the interest earned by the Xavier is,

$I=12324-12000\\I=324$

Total time period is 3 years and the account earned simple interest. Thus, put these values in the above formula as,

$324=\dfrac{(12000)R(3)}{100}\\R=\dfrac{32400}{12000\times3}\\R=9\%$

Hence, the annual interest rate on the saving account of Xavier which is earned simple interest is 9%.

Learn more about the simple interest here;

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