Question

if you want to earn 2 nnual simple interest on an investment, how much should you pay for a note that will be worth $18,500 in 10 months? (round your answer to two decimal places.)

Answer 1

To earn 2% annual simple interest and have a note worth $18,500 in 10 months, you should pay $111,000.

Step-by-step explanation:

To calculate the price of a note that will be worth $18,500 in 10 months, we need to use the formula for simple interest:

Simple Interest = Principal × Rate × Time

We are given the time (10 months) and the Future Value ($18,500), but we need to find the principal.

Rearranging the formula, we have:

Principal = Future Value / (Rate × Time)

Since we want to earn 2% annual simple interest, which is equivalent to 2% / 12 months = 0.1667% monthly, we can substitute the values into the formula:

Principal = $18,500 / (0.1667% × 10) = $111,000

Therefore, you should pay $111,000 for the note to earn 2% annual simple interest and have it worth $18,500 in 10 months.