Question

How long will it take $500 to double at a simple interest rate of 5%? Explain how you found your answer.

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Answer 1

20 years

Explanation:

Simple interest is only interest on the original principal amount. Every year, you earn the same interest amount.

At 5% simple interest, you earn 5% of the principal each year.

In any year, you earn

5% of $500 = 5% * 500 = 0.05 * 500 = $25

Each year, you earn $25 in interest.

How many years will it take to earn a full $500 by earning $25 per year?

$500/$25 = 20

It takes 20 years to double the $500.