Question

A certificate of deposit has an annual simple interest rate of 5.25%. If $567 in interest is earned over a 6 year period, how much was invested?

Answer 1

To determine the amount invested in a CD with an annual simple interest rate of 5.25% that has earned $567 over 6 years, we use the simple interest formula. After calculations, we find that $1,800 was the initial investment.

Step-by-step explanation:

To find out how much was invested in a certificate of deposit (CD) with a simple interest rate of 5.25% when $567 in interest is earned over 6 years, we need to use the formula for simple interest: Interest (I) = Principal (P) × Rate (R) × Time (T). In this scenario, we are given the interest earned (I = $567), the annual simple interest rate (R = 5.25%), and time (T = 6 years).

Now we rearrange the formula to solve for Principal (P):

P = I / (R × T)

First, convert the interest rate from a percentage to a decimal:

R = 5.25% = 0.0525

And then plug the values into the formula:

P = $567 / (0.0525 × 6)

P = $567 / 0.315

P = $1,800

Therefore, $1,800 was invested in the certificate of deposit.

Answer 2

Find the the amount of interest per year. Since $567 were earned over 6 years, you divide the interest earned by the number of years it took to accumulate it:

$567/6 years = $94.5/year

Divide that by the interest rate which the interest rate needs to be in decimal form:

$94.5/.0525 = $1800