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If I put \$500 into an account and left it alone for three years earning simple interest, and at the end of three years I withdrew \$650, what interest rate was I earning? Can you explain how you got your answer so i can understand what to do.

Feb 18, 2020

#1
+1

\$650 - \$500 =\$150 simple interest earned over 3 years.

\$150 / 3 =\$50 simple interest earned in 1 year.

\$50 / \$500 = 10 % simple interest rate per year.

Feb 18, 2020
#2
0

10% interest rate would yield 665,5 so that's incorrect.

Guest Feb 18, 2020
#5
+2

\$665.50 is compound interest NOT simple interest(which says in the question!).

Guest Feb 18, 2020
#3
+2

Interst amount  earned  must have  been   650 - 500   = \$150

And   I  =  Prt

Where     I  = interest    P  = original amount     r =interest rate      t  = time in years

So

150 = 500 * r * (3)

150  = 1500 * r     divide both sides by  1500

150 /1500 =  1/10   = r   = .10   =  10% = interest rate

This makes sense.....the interst earned each year  =  .10 * 500  =   \$50

So...at the end of 3 years....we have 3 * 50    = \$150  more than what we originally deposited   Feb 18, 2020
edited by CPhill  Feb 18, 2020
#4
+1

Does simple interest rate mean it's not compounding?

danne9000  Feb 18, 2020
#6
+1

Right....not compounding.....the interest earned each year  is on the original amount.....thus..it is constant   CPhill  Feb 18, 2020
#7
+1

If I put \$500 into an account and left it alone for three years earning simple interest, and at the end of three years I withdrew \$650, what interest rate was I earning? Can you explain how you got your answer so i can understand what to do.

Simple interest formula is:          A = P ( 1 + rt )

A - final amount                            650 = 500 ( 1 + r * 3 )  /500

P - principal                                   650/500 = 1 + 3r

r - interest rate                                1.3 = 1 + 3r

t - time ( in years)                               3r = 0.3

r = 0.1    ( 10% ) Feb 19, 2020