Question

Mike's grandmother opened a savings account in Mike's name and deposited some money into the account. The account pays an annual simple interest rate of 7%. After 14 years, the interest earned on the account was $6,860. How much money did Mike's grandmother deposit in the account?

A.
$7,500
B.
$8,000
C.
$7,000
D.
$6,000

Answer 1

The formula for simple interest is I = P*r*t where I is the interest earned, P is the initial deposit, r is the rate in the form of a decimal, and t is time in years. Our formula filled in with what we have looks like this: 6860 = P(.07)(14), which simplifies to 6860 = .98P. Divide to get that P = 7000, choice C from above.