A principal of $5000 was invested in a savings account for 4 years. If the interest earned for the period was $400, what was the interest rate? [Hint: The formula for simple interest is I=Prt.]
I = PRT
400 = 5000 * R * 4
400 = 20,000R
0.02 = R
R = 2%
To find the interest rate, we can use the formula for simple interest: I = P * r * t, where:
- I is the interest earned,
- P is the principal (initial amount),
- r is the interest rate,
- t is the time in years.
In this case, we know:
- The principal (P) is $5000.
- The interest earned (I) is $400.
- The time (t) is 4 years.
We can rearrange the formula to solve for the interest rate (r):
r = I / (P * t)
Plugging in the values we have:
r = 400 / (5000 * 4)
To calculate this, divide 400 by the product of 5000 and 4:
r = 400 / 20000
Simplifying the division:
r = 0.02
The interest rate is 0.02, or 2%.