Question

How long will it take for a sum of $800 attracting simple interest to become $830 if the rate is 9%? Compute the return on this investment.

Answer 1

Answer:

5 months

ROI = 3.75 %

Step-by-step explanation:

Since,

The simple interest formula,

$I=P\times r\times t$

Where,

P = Principal amount,

r = rate per period ( in decimal )

t = number of periods,

Here, P = 800, r = 9% = 0.09,

If A is the future amount,

We have, A = 830

I = A - P = 830 - 800 = 30

By substituting the values in the above formula,

$30=800\times 0.09\times t$

$30=72t$

$\implies t =\frac{30}{72}=\frac{5}{12}$

Hence, it will take 5 months.  ( 1 year = 12 months )

Now,

$\text{Return on investment }=\frac{I}{P}\times 100$

$=\frac{30}{800}\times 100$

$=3.75\%$