Question

Wendy is a waitress and has $15,000 toinvest, and wishes to gain $4,200 in interestover the next eight years. Approximatelywhat is the minimum simple interest rateWendy needs to reach her goal?

Answer 1

The formula for determining simple interest is expressed as

I = PRT/100

where

I = interest earned

R = interest rate

T = number of years

P = principal or amount invested

From the information given,

P = 15000

I = 4200

T = 8

Thus, we have

4200 = (15000 x R x 8)/100

4200 = 1200R

R = 4200/1200

R = 3.5

The required interest rate is 3.5%