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After 7 years, Abner earned $1575 in simple interest from a CD into which he initially deposited $6000. What was the annual interest rate of the CD?

Respuesta :

The answer is C. 3.75%

The annual interest rate of the CD was 3.75 %

Explanation

Simple Interest formula is : [tex] I =P*r*t [/tex] , where [tex] I= [/tex] Amount of interest, [tex] P= [/tex] Principal/Initial amount, [tex] r= [/tex] rate of interest in decimal form and [tex] t= [/tex] time in years

Here Abner earned $1575 in simple interest and he initially deposited $6000. So, [tex] I=1575 [/tex] dollar and [tex] P= 6000 [/tex] dollar

Also given that, [tex] t = 7 [/tex] years

Now according to the formula...

[tex] I= P* r*t\\ \\ 1575= 6000*r*7\\ \\ 1575= 42000*r\\ \\ r= \frac{1575}{42000}= 0.0375 [/tex]

For getting the interest rate in percentage, we will multiply it by 100%. So... (0.0375 × 100) % = 3.75 %

So, the annual interest rate of the CD was 3.75 %

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