Question

Alana has $2000 to invest in a savings account that pays simple interest. She would like to leave the money in the account for 3 years and earn an additional $150. What interest rate, `I = Prt`, must the bank pay in order for Alana to earn this amount?

Answer 1

The interest rate in the formula provided is r, so we must set up an equation to find that variable.

Explanation:

She has an original amount (the principal, the p variable) as $2000. The time, in years, (the t variable) is 3. The final amount of interest earned (the i variable) is $150. Thus, set up an equation as follows:

`150=2000*r*3`

Solve the equation for r

`150=6000r rarr` Multiply the 2000 and 3

`r=0.025 rarr` Divide each side by 6000

Since interest rates are usually expressed in percentages, we need to convert the 0.025 to a percentage. 0.025 would be equivalent to 2.5%, or `2.5/100`

Thus, the interest rate must be at least 2.5%