Question

How much money would i need to invest for 6 years at 4 ¼% simple interest to earn 125 kina

Answer 1

Given:

The final amount is A = 125 kina.

The rate of interest is r = 4 1/4%.

The number of years is t = 6 years.

The objective is to find the initial amount to be invested.

Step-by-step explanation:

The rate of interest can be converted as,

`\begin{gathered} r=4(1)/(4)\text{ \%} \\ =(16+1)/(4)\text{ \%} \\ =(17)/(4) \\ =4.25\text{ \%} \\ =0.0425 \end{gathered}`

The general formula to find the amount obtained by simple interest is,

`\begin{gathered} A=P(1+rt) \\ P=(A)/((1+rt))\text{ . . . . (1)} \end{gathered}`

To find P :

On plugging the given values in equation (1),

`\begin{gathered} P=(125)/((1+0.0425(6))) \\ =(125)/(1.255) \\ =99.6015\ldots \\ \approx99.6 \end{gathered}`

Hence, the principal amount to be invested is 99.6 kina.