After 2 years, $5,000 deposited in a savings account with simple interest had grown to a total of $5,100. What was the interest rate?
Use the formula i = prt, where i is the interest earned, p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years.
Answer options:
1) 0.5%
2) 1%
3) 2%
4) 2.5%
To find the interest rate, we can use the formula ( i = prt ).
1. Identify the values:
– Principal (p) = $5,000
– Total amount after 2 years = $5,100
– Time (t) = 2 years
2. Calculate the interest earned (i):
[
i = text{Total Amount} – text{Principal} = 5,100 – 5,000 = 100
]
3. Plug values into the formula:
[
100 = 5,000 times r times 2
]
4. Solve for r:
[
100 = 10,000r
]
[
r = frac{100}{10,000} = 0.01
]
5. Convert to percentage:
[
r = 0.01 times 100 = 1%
]
The interest rate is 1%, so the correct answer is option 2) 1%.