Question

You deposit $2000 in an account that earns simple interest at an annual rate of 4%. How long must you leave the money in the account to earn $500 in interest

Answer 1

t = 6.25 years

(about 6 years 3 months)

Equation:

t = (1/r)(A/P - 1)

Calculation:

First, converting R percent to r a decimal

r = R/100 = 4%/100 = 0.04 per year,

then, solving our equation

t = (1/0.04)((2500/2000) - 1) = 6.25

t = 6.25 years

The time required to get a total amount, principal plus interest, of $2,500.00 from simple interest on a principal of $2,000.00 at an interest rate of 4% per year is 6.25 years (about 6 years 3 months).