Question

Stacey wins $8000 in the lottery, and decides to invest it in a simple interest CD. The CD has an annual interest rate of two percent. When the CD matures, Stacey will earn six hundred forty dollars in interest. How much time is left in the school year when Stacey will begin collecting on her loans?

Answer 1

2.5 years

Explanation:

Let's break this down step by step. The first thing we'll do is set up the equation for simple interest, with I standing for interest, P standing for principal (the amount of money invested), r standing for interest rate, and t standing for time in years. I = Prt.

Now we can plug in the values we know to solve for t. I = $640, P = $8000, and r = 0.02 (or 2%). So, I = (8000)(0.02)(t). Then, divide both sides by 8000 to get t = I/8000(0.02). Let's simplify that expression for t: t = I/1600. Now, we can plug in the value of I that we know: t = 640/1600. Finally, we'll divide both sides by 640 to get t = 1600/640, and the answer is t = 2.5, or 2 and a half years. That means there are 2.5 years left in the school year when Stacey will begin collecting on her loans.