Newton currently has a balance of $1,716.18 in an account he has held for 29 years. He opened the account with an initial deposit of $784. What is the simple interest rate on the account?

Question

Joseph Lynch

Mathematics

8 February, 14:06

Newton currently has a balance of $1,716.18 in an account he has held for 29 years. He opened the account with an initial deposit of $784. What is the simple interest rate on the account?

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Yaretzi Quinn · Answer 1

In economics, money has a time value because it has to adjust with the inflation rate of the economy. Your $1,000 will not have the same value 20 years from now. This is accounted for by the interest. There are two types of interest: the simple interest and the compounding interest.

In simple interest, the change of your money value with time is constant. The equation to be used is : F = Pit, where F is the future worth, P is the present worth, i is the effective interest rate, and t is the time. Using this equation:

$1,716.18 = $784*i*29

i = 0.07548 or 7.548%