Question

Ms. Li opened a retirement account with adeposit of $2,500. This account earns 4% simple interest annually. How many years will it take her to earn $500 on her $2,500 deposit?

Answer 1

5 years

Explanation:

Use the simple interest formula: I = prt

Plug in 500 as I, since that is the amount of interest being earned.

Plug in 2,500 as P and 1.04 as r.

I = prt

500 = (2,500)(0.04)t

500 = 100t

5 = t

So, it will take 5 years to earn $500 on the deposit.