Interest Rate Word Problem

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girlongixxer

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Jul 2, 2006
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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?

Could someone show me how to work this?
 
Is this simple or compound interest? What formula did they give you to use? How far have you gotten in applying that formula?

Thank you.

Eliz.
 
stapel said:
Is this simple or compound interest? What formula did they give you to use? How far have you gotten in applying that formula?

Thank you.

Eliz.
Click to expand...

It is simple and I was dividing 400 into 1000 but I drew a blank.
 
girlongixxer said:
I was dividing 400 into 1000 but I drew a blank.
Click to expand...
I'm sorry, but I'm not seeing how "1000" is coming into play...?

Please reply with the formula(s) you are using, and a clear listing of your steps. Thank you.

Eliz.
 
stapel said:
girlongixxer said:
I was dividing 400 into 1000 but I drew a blank.
Click to expand...
I'm sorry, but I'm not seeing how "1000" is coming into play...?

Please reply with the formula(s) you are using, and a clear listing of your steps. Thank you.

Eliz.
Click to expand...

oops I meant to say 5000 but i think i figured it out. i got:
Interest was $100/year so divide $5000 into $100 to get 2%
 
Yes you are correct. :D 8-)

Definition of Simple Interest: \(\displaystyle I=Prt\)
Given: \(\displaystyle 400=(5000)r(4)\)
Subsitution: \(\displaystyle 400=20,000r\)
Division Property: \(\displaystyle .02\Rightarrow2%\)

So \(\displaystyle r=2%\)

Good Job!
 
...assuming it was a simple interest accumulation. The problem statement should provide better information.
 
Agree with TK; the way it's worded, answer is:
1.94265~% cpd annually, resulting in a 2% yield after 4 years....
 
tkhunny said:
...assuming it was a simple interest accumulation. The problem statement should provide better information.
Click to expand...

girlongixxer said:
It is simple and I was dividing 400 into 1000 but I drew a blank.
Click to expand...
 
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