Question

Jodi is trying to save money for a down payment on a house. She invests $6,000 into an account paying 5.5% simple interest. For how long must she save if she needs $7,300 for the down payment? A. 2 years B. 3 years C. 4 years D. 5 years

Answer 1

You would need to set up a formula here for simple interest (non-compounding)

interest = principle X interest X term

the amount of interest earned is the future value (ending value) minus the previous value or 7,300-6000 = 1,300 in interest

Then we need to find out how many years it would take to earn that amount

1,300 = (6,000 * .055)* x

1,300=330x

then isolate x 1,300/330=x

x= 3.9 or about 4 years