Question

How much to the nearest dollar should you deposit in a savings account at 2.5% annual simple interest in order to have a balance of $20,000 after five years?

Answer 1

The amount we have to deposit in a savings account x = $ 17777.78

Explanation:

Amount = $ 20000

R = 2.5 %

Time = 5 years

Take principal amount = x

Simple interest earned in five years

S.I. =
`(P R T)/(100)`

`S.I. = (P (2.5)(5))/(100)`

`S.I. = (x)/(8)` ------- (1)

We know hat total amount is given by

Total amount = principal amount + simple interest

A = x + S.I.

`A = x + (x)/(8)`

`A = (9x)/(8)`

Given that the total amount after 5 years is = $ 20000

`(9x)/(8) = 20000`

x = $ 17777.78

This is the amount we have to deposit in a savings account.