Question

Asher cashed in a one-year term deposit after only five months had elapsed. In order to do so, he accepted an interest rate penalty—a reduction from the scheduled 5.5% rate of simple interest. If he was paid $145.83 interest on the $10,000 term deposit, what reduction was made in the per annum rate of simple interest?

Answer 1

I = PRT

145.83 = 10,000 * R * 0.4167

148.83 = 4,166.67R

148.83/4,166.67 = R

0.0357 = R

3.57% = R