What is the simple interest rate of a 7-month GIC that grows from $30,000 to its maturity value of $31,500?

A) 5.00%
B) 8.16%
C) 8.57%
D) 8.95%
E) 9.88%

Question

What is the simple interest rate of a 7-month GIC that grows from $30,000 to its maturity value of $31,500?A)  5.00%B)  8.16%C)  8.57%D)  8.95%E)  9.88%

Salma Hameedi · Accepted Answer

Final Answer : C, Explanation :   The simple interest rate can be calculated using the formula   I = P R T I = PRT I = PRT  , where   I I I   is the interest earned,   P P P   is the principal amount,   R R R   is the rate of interest per time period, and   T T T   is the time period. Here,   I = $ 31 , 500 − $ 30 , 000 = $ 1 , 500 I = \$31,500 - \$30,000 = \$1,500 I = $31 , 500 − $30 , 000 = $1 , 500  ,   P = $ 30 , 000 P = \$30,000 P = $30 , 000  , and   T = 7 12 T = \frac{7}{12} T = 12 7 ​   year (since there are 12 months in a year). Rearranging the formula to solve for   R R R  , we get   R = I P T R = \frac{I}{PT} R = PT I ​  . Plugging in the values,   R = $ 1 , 500 $ 30 , 000 × 7 12 R = \frac{\$1,500}{\$30,000 	imes \frac{7}{12}} R = $30 , 000 × 12 7 ​ $1 , 500 ​  , which simplifies to   R = 0.0857 R = 0.0857 R = 0.0857   or   8.57 % 8.57\% 8.57%  .

What is the simple interest rate of a 7-month GIC that grows from $30,000 to its maturity value of $31,500?

A) 5.00%
B) 8.16%
C) 8.57%
D) 8.95%
E) 9.88%

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