Question

Margo sold her house for $350,000 and bought a new house for $275,000. She put the rest of the money in a money market that earns a 7% interest rate. How much interest will she have earned a year later?

Option 1: $17,500
Option 2: $20,000
Option 3: $24,500
Option 4: $26,000

Answer 1

Margo will have earned $5,250 in interest after one year by investing the remaining $75,000 from her house sale at a 7% interest rate in a money market account. This is calculated using the formula for simple interest.

Step-by-step explanation:

Margo sold her house for $350,000 and then bought a new house for $275,000. The difference, which is the amount she put in a money market account, is $350,000 - $275,000 = $75,000. The money market account earns an interest rate of 7%. To calculate the interest after one year, use the formula for simple interest: Interest = Principal × Rate × Time. Applying this formula:

Interest = $75,000 × 7% × 1

Interest = $75,000 × 0.07

Interest = $5,250

Therefore, the amount of interest Margo will have earned a year later is $5,250, which is not one of the options provided in the question.