In: Accounting
Charles deposited $12,000 in the bank. He withdrew $5000 from his account after one year. If he receives a total amount of $9340 after 3 years, find the rate of simple interest.
Years | Principal | Interest @10% | Interest @8% | Interest @9% | ||
1 | 12000 | 1,200 | 960 | 1080 | ||
2 | 7000 | 700 | 560 | 630 | ||
3 | 7000 | 700 | 560 | 630 | ||
Total interest amount | 2,600 | 2,080 | 2,340 | |||
The principal value which charles will receive at the end of 3rd year will be $7,000, since | ||||||
he withdraw $5,000 at end of year 1 | ||||||
It means that charles will receive a total of $2,340($9,340-$7,000) as interest. | ||||||
As we can see from the above table that by trial and error method the simple interest rate is 9% | ||||||
Note:We can also perfrom interpolation and find out the Interest rate. |