Five years ago Ruth made a deposit of 500 into a savings acc

Five years ago, Ruth made a deposit of $500 into a savings account that pays simple interest. She made no further deposits, and now her account is worth $750. What was the rate of interest per year?

A. 2%

B. 4%

C. 9%

D. 10%

Solution

D. Simple interest problems use the formula I = prt, where I is the amount of interest, p is the principal or the amount saved or invested, r is the rate of interest, and t is the amount of time that the interest is accruing. In this problem, you are asked to find the interest, given that the principal is $4,000, the rate of interest is 4%, and the amount of time is 3 years. Substituting this information into the formula, you get

I = 4,000(0.04)(3) = $480 of interest