Question: Josh invested $5000 in a bank. The balance was $6600 after 8 years. Find the interest rate the bank paid him.


A ) 5%
B ) 6%
C ) 3%
D ) 4%

Steps to derive

1 Simple interest I = Balance - Principal

 [Substitute the values.]
2 I = $6600 - $5000

 [Subtract.]
3 I = $1600

4 The formula for simple interest is I = PTR, where, I is the simple interest, P is the principal, T is time in years and R is the interest rate per year.

 [Substitute I = 1600, P = 5000 and T = 8.]
5 1600 = 5000 x 8 x R

 [Solve for R.]
6 r = 0.04

 [Convert the decimal number to percent.]
7 = 4%

8 The interest rate is 4%.



Hence the right answer is Option D

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