Mr Tan deposits $3600 in a savings account that pays simple interest. He does not withdraw any interest. After 3 years, he has earned a total of $189 in interest. What is the simple interest rate per year?
- 1.75%
- 5.25%
- 3.5%
- 0.175%
Need a hint?
Find the interest for one year first, then compare it with the amount deposited.
Worked answer
- Interest earned each year = $189 ÷ 3 = $63
- Rate per year = $63 ÷ $3600 = 0.0175
- 0.0175 = 1.75%
Answer: 1.75% % per year
The mistake this question tests
Habit
Left out the units
Pupils divide the total interest by the deposit and forget to divide by the 3 years, getting 5.25%.
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