Question

£15,000 was deposited in a savings account that pays simple interest.

After 13 years, the account contains £19,875.
Work out the annual interest rate of the account.
Give your answer as a percentage (%) to 1 d.p.

Answer 1

the annual interest rate of the account is 2.5%

Explanation:

Simple Interest = Principal × Interest Rate × Time

Simple Interest = £19,875 - £15,000 = £4,875

Principal = £15,000

Time = 13 years

Simple Interest = £19,875 - £15,000 = £4,875

Principal = £15,000

Time = 13 years

£4,875 = £15,000 × Interest Rate × 13

Interest Rate = £4,875 / (£15,000 × 13)

Calculating the interest rate:

Interest Rate = 0.025

Interest Rate = 0.025 × 100% = 2.5%

Answer 2

2.5%

Explanation:

£19,875 - £15,000 = £4,875

I = prt

4875 = 15000 × r × 13

r = 4875/(15000 × 13)

r = 0.025

r = 2.5%