Question

At what rate does a payment plan for $1,500 accumulate $450 interest after 6 years?

Answer 1

At a rate of 5%.

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

In this question:

Payment plan for $1500 means that
`P = 1500`

$450 interest after 6 years means that
`E = 450, t = 6`

We have to find the rate I. So

`E = P*I*t`

`450 = 1500*I*6`

`I = (450)/(1500*6)`

`I = 0.05`

At a rate of 5%.