Question

Dylan invested some money in his bank . He agreed a simple interest rate of 3%per annum for a period of 2 years . at the end of 2 year period the value of his investement increased by 72 work out Dylan initial investement

Answer 1

1200 is Dylan's initial investment.

Explanation:

Firstly on this type of problem we have two unknowns which are Dylans initial investment and also the future value of the investment but we are going to further give a clear analysis on this simple interest problem by letting X = initial investment then we use the formula: Fv = Pv(1+in), for which this is a simple interest formula now to further explain which values we will substitute in the above mentioned formula;

Pv is the initial investment that Dylan made which is X

Fv is the future value of the investment after two years which is X+72

i is the interest rate of the investment which is 3%

n is the number of years of the investment which is 2 years

now we substitute on the above mentioned formula,

X+72 = X(1+3%x2) now we find the value in brackets

X+72 = 1.06X now we group like terms

72 = 1.06X - X

72 = 0.06X then we divide both sides by 0.06 to get the value of X

1200 = X

therefore the initial investment is 1200. The reason behind saying the future value of the investment is X+72 is that we are told on the statement that the investment after two years grows by 72.