Question

Pia invests $2500 in an account that earns simple interest. At the end of each month, she earns $11.25 in interest.

a) What annual rate of simple interest is Pia earning?
Round your answer to two decimal places.
b) How much money will be in her account after 7 years?
c) How long will it take for her money to double?

Answer 1

a) 5.4%

b) $3445

c) It will take approximately 18.5 years.

Explanation:

$11.25 per month × 12 month/year = $135/year.

a)

The account earns $135 interest per year.

percent = part/whole × 100%

percent = 135/2500 × 100% = 5.4%

b)

7 × $135 = $945

In 7 years, she will have earned $945 interest.

$2500 + $945 = $3445

c) To double her money, she needs to earn $2500 interest.

She earns $135 interest per year.

$2500/$135 = 18.51

It will take approximately 18.5 years.