Question

Determine the interest rate earned on a $2,350 deposit when $2,650 is paid back in one year. (Round your answer to 2 decimal places.)

Answer 1

Computation of Interest rate earned

Interest Rate Earned for one year

=( maturity proceeds - Initial deposit )/ Initial deposit *100*

given, Initial Deposit =$2350

Maturity proceeds at the end of the year =$2650

Therefore ,

Interest Rate Earned for one year

=( maturity proceeds - Initial deposit )/ Initial deposit *100*

=($2650-$2350)/$2350*100

=12.77%

Interest Rate Earned =12.77%

For your verfication

Initial Deposit =$2350

Add Interest @12.77% on $2350($2350*12.77/100) =$300(rounded off)

Net proceeds on maturity ($2350+$300) =$2650

Hence proved