Answer:
4%.
Step-by-step explanation:
We have been given that Ethan invested £500 in the bank for 2 years. He earned £40 simple interest in total. We are asked to find the annual interest rate.
We will use simple interest formula to solve our given problem.
[tex]I=Prt[/tex], where,
I = Amount of interest,
P = Principal amount,
r = Annual interest rate in decimal form,
t = Time in years.
Upon substituting our given values in above formula, we will get:
[tex]40=500*r*2[/tex]
[tex]40=1000*r[/tex]
Now, we will divide both sides of our given equation by 100.
[tex]\frac{40}{1000}=\frac{1000*r}{1000}[/tex]
[tex]\frac{4}{100}=r[/tex]
[tex]\frac{1}{25}=r[/tex]
[tex]0.04=r[/tex]
Since our given interest rate is in decimal form, so we need to convert it in percentage.
[tex]0.04\times 100\%=4\%[/tex]
Therefore, the simple interest rate per annum is 4%.
