Gustavo invests £520 for 6 years in a bank account paying simple interest - OCR - GCSE Maths - Question 7 - 2017 - Paper 1

The formula for simple interest is:

$I = P imes r imes t$

where:

• $I$ is the interest earned,
• $P$ is the principal amount (initial investment),
• $r$ is the annual interest rate (as a decimal), and
• $t$ is the time in years.

We can rearrange the formula to solve for the annual rate of interest ($r$):

$r = \frac{I}{P imes t}$

Now we can substitute the known values into the rearranged formula:

• $I = £109.20$
• $P = £520$
• $t = 6$ years

Thus, we have:

$r = \frac{£109.20}{£520 \times 6}$.

Calculating this gives:

$r = \frac{£109.20}{£3120} = 0.035$.

To convert this to a percentage, multiply by 100:

$r \times 100 = 3.5\%$

The annual rate of interest earned on the investment is 3.5%.