Chapter 7.7, Problem 16E

To determine

To calculate: the simple interest rate when $\text{deposit as Principal(}P)=\$800,$ becomes

Account $\text{Balance}(A)=\$900$ in $2\text{years}$

Answer to Problem 16E

The rate of simple interest is $6\frac{1}{4}\%$

Explanation of Solution

Given information: $\text{Balance}(A)=\$900,\text{Principal(}P)=\$800\text{and}\text{time}(t)=2\text{years}$

Concept Used:

Simple interest problem requires the use of the following formula:

  $\begin{array}{l}I=Prt\\ A=P+I\end{array}$

Calculation:

As per the given problem

  $\text{Balance}(A)=\$900,\text{Principal(}P)=\$800\text{and}\text{time}(t)=2\text{years}$

Substitute the values in the formula

  $\begin{array}{l}A=P+I\\ \Rightarrow 900=800+I\\ \Rightarrow I=900-800\\ \Rightarrow I=100\end{array}$

Therefore, the rate of interest obtained as:

  $\begin{array}{l}I=Prt\\ \Rightarrow 100=800\times \frac{r}{100}\times 2\\ \Rightarrow r=\frac{100}{16}\\ \Rightarrow r=6\frac{1}{4}\%\end{array}$

The rate of simple interest is $6\frac{1}{4}\%$

Conclusion:

The rate of simple interest is $6\frac{1}{4}\%$