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Determine the interest rate earned on a $2,550 deposit when $3,150 is paid back in one year....

Question:

Determine the interest rate earned on a $2,550 deposit when $3,150 is paid back in one year. (Round your answer to 2 decimal places.)

Interest Earned

The rate of interest earned is the additional amount earned over the principal during the maturity or during the period of the loan. The interest is represented as the percent of the principal amount which is called the interest rate. This interest rate is the annual rate, and hence the interest is to be charged accordingly.

Answer and Explanation:


The rate of interest is 23.53%

Explanation

Interest Rate = (Interest / Principal) * 100

Here,

  • Maturity Amount = $3150
  • Principal Amount = $2550
  • Interest = Maturity Amount - Principal Amount => $3150 - $2550 = $600

So,

Interest Rate = ($600 / $2550) * 100 = 23.53%


Learn more about this topic:

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Ratios of Interest to the Long-Term Creditor

from Accounting 102: Intro to Managerial Accounting

Chapter 9 / Lesson 8
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