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15 May, 05:13

Tim put $275 in the bank one year ago and forgot about it. Today, the bank sent Tim a statement indicating that he now has $294.25 in his account. What interest rate did Tim earn?

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  1. 15 May, 05:17
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    The interest rate is 7%

    Explanation:

    In order to calculate this we have to know what a simple interest is; it is fees paid on an investment or loan over a period of time, where the interest is not compounded.

    Mathematically, simple interest is represented as;

    Interest = P*R*T

    where P = principal (deposited amount) = 275

    R = Interest rate

    T = time in years = 1 year

    In our example, the final amount has been given, hence, we can calculate interest, which is the final amount - the deposited amount

    Interest = 294.25 - 275 = 19.25

    ∴ 19.25 = 275 * R * 1

    = 19.25 = 275R

    ∴ R = 19.25 : 275 = 0.07

    Rate = 0.07 = 7/100

    therefore interest rate = 7%
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Home » Business » Tim put $275 in the bank one year ago and forgot about it. Today, the bank sent Tim a statement indicating that he now has $294.25 in his account. What interest rate did Tim earn?
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