Question

A bank offers a CD that pays a simple interest rate of 5.5%. How much must you put in this cd now in order to have $8000 for a kitchen remodeling project in two years?

Answer 1

The correct answer is: $7207.207

Step-by-step explanation:
The formula to find the amount that involves simple interest is:

A = P(1+rt) --- (1)
Where
A = Amount = $8000
P = Principal amount = ?
r = Annual interest rate in decimal form = 5.5% = 0.055
t = Loan period expressed in years = 2

Plug in the values in equation (1)
(1) => (8000) = P*(1 + 0.055*2)
P = 8000/1.11 = $7207.207 (answer)