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
Jim G.
Jun 30, 2018

8%

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%

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