Question

What is the value of Louie's investment if he invests for 3 years, then removes and spends $1,000, and theninvests what is remaining for 4 more years at a rate of 4%?

Answer 1

The simple interest formula is:

`SI=Prt`

where P is the prinipal, r is the interest rate (in decimal form) and t is the time.

Since Louie invested 5000 for three years at a rate of 2.5% he has:

`SI=5000(0.025)(3)=375`

$375 of intetest after 3 years, that is he has a total of $5375. Then he removes $1000, and invest the rest for 4 years at a rate of 4%, then he has:

`SI=4375(0.04)(4)=700`

Therefore she has in total $5075 at the end.