Frances earns $6350 for completing a special project, she deposits it into a savings account. What annual simple interest rate is needed to have $7000 in 1 year?
I pasted this in from here: Simple Interest
Given an initial balance of 6350, an accumulated balance of 7000, and time of 1, Calculate the Interest using Simple Interest:
The formula for this is:
Interest Rate = ((Accumulated Value / Principal) - 1) / time
Plugging in our values that we entered, we get:
Interest Rate = ((7000 / 6350) - 1) / 1
Simplifying, we get:
Interest Rate = (1.1023622047244095 - 1) / 1
Interest Rate = 0.10236220472440949 / 1
Interest Rate = 0.1024 or 10.24%
Let me know if you have questions.
You can test that by using the Accumulated Value of Simple Interest Formula to check the answer. I'll paste in the math as well:
Given an initial balance of 6350, an interest rate of 10.24%, and time of 1, Calculate the Accumulated Balance using Simple Interest:
The formula for this is:
Accumulated Value = Principal * (1 + (interest rate * time))
Plugging in our values that we entered, we get:
Accumulated Value = 6350 * (1 + (0.1024 * 1))
Simplifying, we get:
Accumulated Value = 6350 * (1 + 0.1024)
Accumulated Value = 6350 * 1.1024
Accumulated Value = 7000.24
If we would have used 0.01 less interest, we would not have made the 7000 balance in 1 year.