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

Guest Feb 18, 2020
 #5
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+2

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

Guest Feb 18, 2020
 #3
avatar+109561 
+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

 

cool cool cool

 Feb 18, 2020
edited by CPhill  Feb 18, 2020
 #4
avatar+122 
+1

Does simple interest rate mean it's not compounding?

danne9000  Feb 18, 2020
 #6
avatar+109561 
+1

Right....not compounding.....the interest earned each year  is on the original amount.....thus..it is constant 

 

cool cool cool

CPhill  Feb 18, 2020
 #7
avatar+531 
+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% )  indecision

 Feb 19, 2020

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