Question

1. (12 points) A newlywed couple want to buy a house. They received $4500 in cash as wedding gifts.

ney estimate they will need $10,000 for the down payment. At 7% simple interest, how long before
they become homeowners?

Answer 1

They need 18 full years to become homeowners.

Explanation:

They received $4,500 in cash as wedding gifts.

They will need $10,000

Difference = $10,000 - $4,500 = $5,500

Use formula

`I=P\cdot r\cdot t,`

where

I = interst

P = principal

r = rate

t = time

In your case,

I = $5,500

P = $4,500

r = 0.07 (or 7%)

t = unknown

Hence,

`5,500=4,500\cdot 0.07\cdot t\\ \\5,500=315t\\ \\t=(5,500)/(315)=(1,100)/(63)\approx 17.46`

They need 18 full years to become homeowners.