Question

What is the annual interest rate if $1600 is invested for 6 years and $456 in interest is earned?

Answer 1

First, find how much interest was earned in 1 year.
Can you do that?

Answer 2

idk how to do that

Answer 3

If $456 is earned in 6 years, how much is earned in 1 year?
It's a simple division problem.

Answer 4

76

Answer 5

Correct.
$76 interest was earned in 1 year.
Since the problem wants the "annual interest rate", we need to find what percent of $1600 $76 is.

Answer 6

We can use a proportion for that.

$1600 is to 100 percent as $76 is to what percent?

\(\dfrac{1600}{100} = \dfrac{76}{x} \)

Now you need to solve for x.
You can cross multiply to do that.
Do you know how to solve a proportion by cross multiplying?

Answer 7

How do we know it's Simple Interest?

Answer 8

We were not told a compounding period, so we have to assume it's simple interest.

Answer 9

if this is simple interest the formula I = PRT can be used where P is the amount invested, R is the interest rate as a percent, and T is the time in years and I will be the $ earned. make R the subject , plug the numbers and solve

Answer 10

On the other hand the poster may be doing a unit on simple interest and may know for a fact that it's simple interest.

Answer 11

"We were not told a compounding period, so we have to assume it's simple interest."

Absolutely not. We MAY make that assumption, but there is no requirement. WE MUST make SOME assumption. We should not proceed with the solution until we have made it clear.