# GED Math Extra Prep: Interest Rates

Word problems on the GED Math test that involve interest rates are usually straightforward. However, you will need to be familiar with the interest rate formula.

## Practice Questions

- Arnold invested $700 in a savings account. After one year, his account balance was $726.25. What percent annual interest did his bank pay?
- Amy invested $500 in a savings account that pays a fixed simple interest rate. After three years, her account balance is $552.50. What percent annual interest did her bank pay?
**A.**3.5%

**B.**5.5%

**C.**10.5%

**D.**17.5%

## Answers and Explanations

- The correct answer is 3.75%.
You can use the following formula to calculate the annual interest rate:

Plug in the given values to find the annual interest rate:

Hence, the interest rate as 3.75%.

Alternatively, the interest formula is

*I*=*Prt*where

*I*is the interest earned,*P*is the principal,*r*is the interest rate, and*t*is the time. Substituting in the values gives youTo convert this decimal answer into a percentage, simply multiply it by 100 to get 3.75%.

- The correct answer is 3.5%.
You can use the following formula to calculate the annual interest rate:

Plug in the given values to find the rate:

This value is for three years of interest, so dividing by 3 gives you the annual simple interest rate, which equals 3.5%. Hence, Choice (A) is correct.