Question

If an investor wants to earn $250 simple interest by investing $600 at 4.5% annual interest, how many years will it take for her to do this (to the nearest year)?

A) 5
B) 7
C) 9
D) 11

Answer 1

To find out how many years it will take to earn $250 simple interest on a $600 investment at 4.5%, use the simple interest formula. After converting the rate to a decimal and rearranging the formula, the calculation shows it takes approximately 9 years, so the correct option is C) 9.

Step-by-step explanation:

Calculating the Time to Earn Simple Interest

To calculate the number of years it will take for an investor to earn $250 in simple interest by investing $600 at 4.5% annual interest, we use the formula for simple interest: I = PRT, where I is the interest earned, P is the principal amount invested, R is the annual interest rate as a decimal, and T is the time in years. In this case, we're solving for T.

Firstly, convert the interest rate to a decimal by dividing by 100: R = 4.5% / 100 = 0.045.

Now, rearrange the formula to solve for T:

T = 9.259...

Therefore, it will take approximately 9 years for the investor to earn $250 in simple interest, which when rounded to the nearest year is still 9 years. So, the correct option is C) 9.