Multiple choice

Tom invested \$50,000 in a bank account for one quarter that paid simple annual interest. He earned \$625 for the quarter. What is the annual interest rate?

  1. 4.8%

  2. 5.0%

  3. 5.2%

  4. 5.5%

  5. 5.6%
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Simple interest I = (P * R * T) / 100. 625 = (50000 * R * 0.25) / 100. 625 = 125 * R. R = 625 / 125 = 5%.

AI explanation

Using the simple interest formula, the quarterly interest rate is calculated as 625 divided by 50000, which is 0.0125 or 1.25%. Since this is for one quarter, the annual interest rate is 1.25% multiplied by 4. This results in an annual rate of 5.0%.

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