Multiple choice

John and Mary each invested \$2,500 in different financial institutions for 3 years. Both investments were made in simple interest-bearing accounts. At the end of 3 years, John received \$75 more in interest from his investment than Mary. If the rate of interest on Mary's investment was 5% per annum, what was the rate of interest on John's investment?

  1. 6%

  2. 7%

  3. 8%

  4. 9%

  5. 10%
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A Correct answer
Explanation

Let R be John's rate. Interest = (P * R * T) / 100. John's interest - Mary's interest = 75. (2500 * R * 3)/100 - (2500 * 5 * 3)/100 = 75. 75R - 375 = 75. 75R = 450. R = 6%.

AI explanation

Using the simple interest formula, Mary's interest over 3 years is 2500 times 5 times 3 divided by 100, which equals $375. Since John earned $75 more, his total interest is 375 + 75, which equals $450. Applying the simple interest formula for John's account, 450 = 2500 times Rate times 3 divided by 100, and solving for the rate gives 4500 divided by 750, which equals 6%.

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