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Question 3

If an investment earns $500 in ten years at 2.9% simple interest, how much was deposited?
Remember than money rounds to two decimal places!

User Tom Bates
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1 Answer

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Answer:

$1724.14

Explanation:

You want to know the amount invested such that the simple interest after 10 years at 2.9% is $500.00.

Simple interest

The simple interest formula can be used to find this. That formula is ...

I = Prt

where I is the interest earned on principal P at annual rate r for t years.

Application

Using the given values, we have ...

500 = P(0.029)(10) = 0.29P

Dividing by the coefficient of P gives ...

500/0.29 = P ≈ 1724.1379

Using P = 1724.14 in the interest equation will give a value of interest that rounds (down) to $500.00.

The amount $1724.14 was deposited.

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Additional comment

Using P = 1724.13 will give a value of interest that rounds up to $500.00.

User RPulvi
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