Question

Maggie has $14,100 to invest, and wishes to gain $4,000 in interest over the next eight years. Approximately what is the minimum simple interest rate Maggie needs to reach her goal?

a. 289%
b. 35596
c. 4.95%
d. 5.18%

Answer 1

The answer is D. 5.18% each year delivers $4050.34 in return

Year 1: Investment*rate = return

Year 2: (Return + previous year investment) * Rate = return in year 2

and so on for 5 years.

Answer 2

Answer: 3.55% per year

Explanation:

Interest at a simple rate is

I = P*r*t, where P is the principal, the money to be investes; r is the rate and t is the time of the investment.

Maggie's case, we have:

P = 14100

I = 4000

r = ?

t = 8

(as we are using t in years, the rate will be in years)

I = P*r*t

4000 = 14100.r.8

4000 = 112800.r

r = 4000/112800

r = 0.0354 = 3.55%