If Jack invests $2,500 for one year and his investment is worth $2,825 at the end of that period, how much interest did he earn on his investment?
Explanation
Answer: C - If Jack invested $2,500 and had $2,825 at the end of his investment period, he earned 13% interest during the year. The equation for simple interest in one term is V = P(1 + i) in which V represents the value with interest added, P is the principle investment and i is the amount of interest accrued during the term. To solve for the interest, divide V by P ($2,825 ÷ $2,500), then subtract 1. The difference (0.13) is the interest rate.
