145k views
0 votes
Sanjay invests 700 dollars in an account paying simple interest at a rate of 2. 5% per year. Calculate the value of his investment at the end of 6 years

User Slavatron
by
7.5k points

1 Answer

3 votes

Explanation:

so, $700 at 2.5% per year for 6 years.

after 1 year he has

700 × 1.025 = $717.50

why can we do that ?

because adding 2.5% to 100% results in 102.5%.

102.5% of 100% is 100% × 1.025.

always remember : a % is always a ratio of units per 100.

so, e.g. 2.5% of 700 is

700 × 2.5/100 = 700 × 0.025 = 17.5

when we add this to the original 700, we get

700 + 700×0.025 = 700(1 + 0.025) = 700×1.025

now, when we do the same thing (multiplying the balance at the end of a year by 1.025) year after year after year ..., we get after 6 years

700×1.025×1.025×1.025×1.025×1.025×1.025 =

= 700 × 1.025⁶ = $811.7853927... ≈ $811.79

User Alex Mazzariol
by
7.8k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories