Question

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

Answer 1

120=1000*r*2
120=2000*r
120/2000=r
r=12/200=6/100
Rate=6%

Answer 2

The rate of interest was 6%.

Explanation:

Alice earned interest of $120 from an investment of $1000 for two years.

Simple interest formula is :

I = p x r x t

We have I = 120

p = 1000

t = 2

r = ?

Substituting the values in formula, we get;

`120=1000*r*2`

=>
`120=2000r`

r = 0.06

And in percentage, it is
`0.06*100` = 6%

Hence, The rate of interest was 6%.