Question

If Wendy wants to invest her $25,000, how many years will it take for her savings to accumulate $40,000 if she invested in a financial institution that provides a simple interest rate of 4.5% per year?

A) 8 years
B) 10 years
C) 6 years
D) 12 years

Answer 1

To determine how many years it will take for Wendy's investment to grow from $25,000 to $40,000 with a simple interest rate of 4.5%, you apply the simple interest formula. The calculation shows it would take approximately 14 years, but this is not one of the provided options, suggesting an issue with the choices provided.

Step-by-step explanation:

If Wendy wants to invest her $25,000, to calculate the number of years it will take for her savings to accumulate to $40,000 at a simple interest rate of 4.5% per year, we can use the simple interest formula:

I = PRT

Where I is the interest, P is the principal amount, R is the rate of interest per year, and T is the time in years. Wendy wants to earn $40,000 - $25,000 = $15,000 in interest. Plugging the values into the formula:

$15,000 = $25,000 × 0.045 × T

To find T, we divide both sides by ($25,000 × 0.045):

T = $15,000 / ($25,000 × 0.045)

T = $15,000 / $1,125

T = 13.33

Since Wendy can only earn interest in whole years, it would take her 14 years to accumulate $40,000 with simple interest. However, this option is not listed in the provided choices, indicating that there may be a calculation error or misunderstanding in the given question or choices.