Tim put $275 in the bank one year ago and forgot about it. Today, the bank sent Tim a statement indicating that he now has $294.25 in his account. What interest rate did Tim earn?

The interest rate is 7%

Explanation:

In order to calculate this we have to know what a simple interest is; it is fees paid on an investment or loan over a period of time, where the interest is not compounded.

Mathematically, simple interest is represented as;

Interest = P*R*T

where P = principal (deposited amount) = 275

R = Interest rate

T = time in years = 1 year

In our example, the final amount has been given, hence, we can calculate interest, which is the final amount - the deposited amount

Interest = 294.25 - 275 = 19.25

∴ 19.25 = 275 * R * 1

= 19.25 = 275R

∴ R = 19.25 : 275 = 0.07

Rate = 0.07 = 7/100

therefore interest rate = 7%