Question

18,000 amounts to 21,600 in 4 years at simple interest. Find the sum of

money that will amount to 25,500 in 5 years, at the same rate of interest.
​

Answer 1

`\$20,400`

Explanation:

we know that

The simple interest formula is equal to

`A=P(1+rt)`

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest

t is Number of Time Periods

step 1

Find the rate of interest

in this problem we have

`t=4\ years\\ P=\$18,000\\ A=\$21,600\\r=?`

substitute in the formula above and solve for r

`\$21,600=\$18,000(1+4r)`

`1.2=(1+4r)`

`4r=1.2-1`

`r=0.2/4=0.05`

The rate of interest is
`5\%`

step 2

Find the sum of money that will amount to 25,500 in 5 years, at the same rate of interest

in this part we have

`t=5\ years\\ P=?\\ A=\$25,500\\r=0.05`

substitute in the formula above and solve for P

`\$25,500=P(1+0.05*5)`

`P=\$25,500/(1.25)=\$20,400`