Question

Graduation is 3 years away and you want to have $850 available for a trip. If your bank is offering a 3-year CD (certificate of deposit) paying 2% simple interest, how much do you need to put in this CD to have the money for your trip?

Answer 1

We need to put $801.88 amount in the bank.

Explanation:

given that

t=3 yr

Need amount $850 after 3 yr so P= $850

Interest rate=2%

We know that for simple interest

`P=A\left(1+(rt)/(100)\right)`

Where r is the Interest rate,t is the time,A is the present amount and P is principle amount after t time.

Here given that P= $850

So now putting the values

`850=A\left(1+(2* 3)/(100)\right)`

So A=$801.88

We need to put $801.88 amount in the bank.