IF Tony earned $600 after investing $3,000 for five years, what was his interest rate?
I=prt
600=300(r)(5)
600= 1500r
600/1500=r
fruit used "simple interest"
But for a five year period it is more likely that compound interest would be used
3600 = 3000(1+i)^5
1.2 = (1+i)^5
take the 5th root
1+i = 1.2^(1/5) = 1.037..
i = .037
or 3.7%
To determine Tony's interest rate, we can use the formula for simple interest:
I = P * r * t
Where:
I = Interest earned
P = Principal amount (initial investment)
r = Interest rate (as a decimal)
t = Time period (in years)
To find the interest rate, rearrange the formula as:
r = I / (P * t)
In this case, Tony earned $600 after investing $3,000 for five years. Let's plug in these values:
r = 600 / (3000 * 5)
Simplifying further:
r = 600 / 15000
Dividing:
r ≈ 0.04
To convert the decimal to a percentage, multiply by 100:
r ≈ 0.04 * 100
r ≈ 4%
Therefore, Tony's interest rate is approximately 4%.