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Mr. Vasquez opened an account with a deposit of $6000. the account earned annual simple interest and he did not make any additional deposit or withdrawals. At the end of 5 years the balance was $6864. What is the annual interest rate on the account?

Sagot :

Simple interest formula:

A = P(1 + rt)

where A is the final amount, P is the principal, r is the interest rate (as a decimal), and t is time.

Given that t is in years, then r will be the annual interest rate.

Substituting with A = 6864, P = 6000, and t = 5, we get:

[tex]\begin{gathered} 6864=6000\cdot(1+r\cdot5) \\ \frac{6864}{6000}=1+r\cdot5 \\ 1.144-1=r\cdot5 \\ \frac{0.144}{5}=r \\ 0.0288=r \end{gathered}[/tex]

The annual interest rate is 0.0288 or 2.88%

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