Question

How long will it take for a sum of $800 attracting simple interest to become $830 if the rate is 9%? Compute the return on this investment.

Answer 1

5 months

ROI = 3.75 %

Explanation:

Since,

The simple interest formula,

`I=P* r* t`

Where,

P = Principal amount,

r = rate per period ( in decimal )

t = number of periods,

Here, P = 800, r = 9% = 0.09,

If A is the future amount,

We have, A = 830

I = A - P = 830 - 800 = 30

By substituting the values in the above formula,

`30=800* 0.09* t`

`30=72t`

`\implies t =(30)/(72)=(5)/(12)`

Hence, it will take 5 months. ( 1 year = 12 months )

Now,

`\text{Return on investment }=(I)/(P)* 100`

`=(30)/(800)* 100`

`=3.75\%`