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Charles deposited $12,000 in the bank. He withdrew $5000 from his account after one year. If...

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Accounting

Charles deposited $12,000 in the bank. He withdrew $5000 fromhis account after one year. If he receives a total amount of $9340after 3 years, find the rate of simple interest.

Answer & Explanation Solved by verified expert
3.9 Ratings (536 Votes)

Years Principal Interest @10% Interest @8% Interest @9%
1 12000             1,200                960 1080
2 7000                700                560 630
3 7000                700                560 630
Total interest amount             2,600             2,080             2,340
The principal value which charles will receive at the end of 3rd year will be $7,000, since
he withdraw $5,000 at end of year 1
It means that charles will receive a total of $2,340($9,340-$7,000) as interest.
As we can see from the above table that by trial and error method the simple interest rate is 9%
Note:We can also perfrom interpolation and find out the Interest rate.

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