What annual rate of interest would you have to earn on an investment of $3500 to ensure receiving $262.50 interest after one year?

To find the annual rate of interest, we can use the simple interest formula:

\[
I = P \times r \times t
\]

Where:
- $ I $ is the interest earned ($262.50),
- $ P $ is the principal or initial investment ($3500),
- $ r $ is the annual interest rate (unknown, what we need to find),
- $ t $ is the time period in years (1 year).

Rearranging the formula to solve for $ r $:

\[
r = \frac{I}{P \times t}
\]

Substituting the values:

\[
r = \frac{262.50}{3500 \times 1} = \frac{262.50}{3500} = 0.075
\]

To express $ r $ as a percentage, multiply by 100:

\[
r = 0.075 \times 100 = 7.5\%
\]

Thus, the annual rate of interest needed is **7.5%**.

Would you like more details or have any questions? Here are some related questions:

1. How is compound interest different from simple interest?
2. What would the interest be if the rate was 6% instead of 7.5%?
3. How do banks calculate interest on a savings account?
4. What happens to the interest if the time period is less than a year?
5. How does inflation affect the interest rates?

**Tip:** Always make sure to differentiate between simple and compound interest as they yield different results over time.

Learn how to calculate the annual interest rate needed on an investment of $3500 to earn $262.50 in interest after one year. This problem uses the simple interest formula and is suitable for students in Grades 8-10.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation