Question

Teresa invested 3000$ in a fund for 5 years and was paid simple interest. The total interest that she received on the investment was 1350$. As a percentage, what was the annual interest rate of her investment?

Answer 1

9%

Explanation:

To find the answer, you have to use the formula to calculate the interest rate:

r=(1/t)(A/P-1), where

r=rate of interest

A=accrued amount=3000+1350=4350

P=principal amount=3000

t=time periods=5

Now, you can replace the values:

r=(1/5)*(4350/3000-1)

r=0.2*(1.45-1)

r=0.2*(0.45)

r=0.09

According to this, the annual interest rate of her investment is 9%.