A sum of $16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest?
1.) 6%
2.) 6.5%
3.) 7.5%
4.) 8%
1.) 6%
2.) 6.5%
3.) 7.5%
4.) 8%
With simple interest, one's investment increases the SAME AMOUNT each year, based on the INITIAL investment.datonman wrote:A sum of $16,000 amounts to $18,400 in two years according to simple interest. What is the rate of interest?
1.) 6%
2.) 6.5%
3.) 7.5%
4.) 8%
$18,400 - $16,000 = $2400
So, the investment increased $2400 over 2 YEARS
$2400 ÷ 2 = $1200
So, the ANNUAL increase is $1200
The INITIAL INVESTMENT was $16,000
$1200/$16,000 = [spoiler]7.5%[/spoiler]
Cheers,
Brent
