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Caleb deposited $1,000 in a savings account with simple interest. One year later, he had earned $100 in interest. 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.
%
To find the interest rate (r), we can rearrange the formula ( i = prt ). Here’s how you can do it step-by-step:
1. Understanding the variables:
– ( i ) (interest earned) = $100
– ( p ) (principal) = $1,000
– ( t ) (time in years) = 1
2. Rearranging the formula:
[
r = frac{i}{pt}
]
3. Substituting the values:
[
r = frac{100}{1000 times 1}
]
4. Calculating:
[
r = frac{100}{1000} = 0.1
]
5. Converting to a percentage:
[
text{Interest rate} = 0.1 times 100% = 10%
]
Therefore, the interest rate was 10%.