Question

Alice earned interest of $120 from an investment of $1000 for two years. What is the rate of simple interest per year what does this mean

Answer 1

Rate of simple interest per year = 6%

It means that every year an amount equal to simple interest per year times of investment is earned by the investor.

Step-by-step explanation:

We have I = prt, where I represents simple interest, p represents principal, r represents interest rate, and t represents time in years.

Here principal, p = 1000 $

Number of years , t = 2 years

Interest received, I = 120$

We need to find rate of interest.

Substituting

120 = 1000 x r x 2

r = 120/2000 = 0.06 = 6%

Rate of simple interest per year = 6%

It means that every year an amount equal to simple interest per year times of investment is earned by the investor.