Question

Neil invested a principal amount of $3,000 into a mutual fund with a simple interest rate of 7.25% per year. How much interest will Neil earn after 18 months? How much is his mutual fund worth now (total)?

Answer 1

Neil will earn $326.25 in simple interest after 18 months. The total value of his mutual fund investment after 18 months is $3,326.25.

Step-by-step explanation:

To calculate the interest earned from Neil's mutual fund investment, we apply the simple interest formula, which is I = P × r × t, where I is the interest, P is the principal amount, r is the interest rate per period, and t is the time in years. In Neil's case, the principal P is $3,000, the annual interest rate r is 7.25%, and the time t is 1.5 years (18 months).

The interest earned over 18 months is calculated as follows:

I = $3,000 × 0.0725 × 1.5

I = $326.25

Therefore, Neil will earn $326.25 in simple interest after 18 months. To find the total value of Neil's mutual fund, we add the interest earned to the principal:

Total value = Principal + Interest

Total value = $3,000 + $326.25

Total value = $3,326.25