Question

Determine the simple interest rate at which $1200 will grow to $1250 in 8 months.

Answer 1

Step-by-step explanation:

2500 = 2400(1+r*8/12)

2500/2400 = 1+r*8/12

25/24 = 1+r*8/12

25/24 = 1+8/12*r

25/24-1 = 8/12*r

1/24 = 8/12*r

(1/24)*(12/8) = r

1/16 = r

r = 1/16

r = 0.0625

r = 6.25%

Answer 2

A = P(1+rt)

1250 = 1200(1+r*8/12)

1250/1200 = 1+r*8/12

1.041 = 1+r*8/12

1.041 = 1+8/12*r

1.041-1 = 8/12*r

0.041= 8/12*r

(0.041)*(12/8) = r

0.492/8 = r

r =0.492/8

r = 0.0615

r = 6.15%

So you would need a 6.15% interest rate.