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Calculate simple interest
Question
Carolyn makes a deposit of $2,800 into a savings account. The bank calculates simple interest annually at a rate of 7.5%.
Interest is added every year on the anniversary of the initial deposit. How many years must Carolyn wait before her
investment exceeds $3,500? Give your answer in years. Do not include units in your answer.
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Answer 1

4

Explanation:

A=P0(1+rt).

We know that A=$3,500,P0=$2,800 and r=7.5%=0.075, so we can rearrange the formula for A to get an explicit expression for t:

A=P0(1+rt)⟹t=A−P0P0r,

and substituting the known quantities gives

r=$3,500−$2,800$2,800×0.075=3.33,

which means, since the interest is paid annually, that she must wait four years for the total investment to exceed $3,500.