Lucille opened an account with a deposit of $5,500.
The account earned annual simple interest.
She did not make any additional deposits or withdrawals.
At the end of 10 years, the balance of the account was $8250.
What is the annual interest rate on this account?
6%
4%
5%
7%
To calculate the annual interest rate, we can use the formula for simple interest:
I = P * r * t
Where:
I = interest earned
P = initial deposit ($5,500)
r = annual interest rate
t = time (10 years)
Given that the balance of the account after 10 years was $8,250, and the initial deposit was $5,500, the interest earned over the 10 years is $8,250 - $5,500 = $2,750.
Now we plug the values into the formula:
$2,750 = $5,500 * r * 10
$2,750 = $55,000r
r = $2,750 / $55,000
r = 0.05
So, the annual interest rate on this account is 5%.
Therefore, the answer is 5%.