Question

If $51.30 interest is earned in two years on a deposit of $95, then what is the simple annual interest rate?

Answer 1

If a principal of P dollars is deposited for T years at a simple interest rate of R, then the interest, I ,will be

I = P*R*T

In our case;

I = $51.30

P = $95

T= 2 years

R = ?

From I = P*R*T we get

R = I/(P*T)

R = 51.30/95*2

R = 0.27 or 0.27 *100 = 27% interest