# A bank offers simple interest on a certificate of deposit. Jaime invests $500 and after one year earns $40 in interest. What was the interest rate on the certificate of deposit?

##### 1 Answer

Jun 30, 2018

#### Explanation:

#"simple interest (I) is calculated using"#

#I=PRT#

#"where P is the principal, R the rate of interest and T time"#

#"in years"#

#"here "I=40, P=500 , R=? and T=1#

#"rearrange the formula to solve for R"#

#R=I/(PT)#

#color(white)(R)=40/(500xx1)=cancel(40)^4/cancel(500)^(50)=4/50=2/25#

#R=2/25xx100%=2/cancel(25)^1xxcancel(100)^4=8%#