Question

A bank offers a CD that pays a simple interest rate of 7.0​%. How much must you put in this CD now in order to have ​$2500 for a​ home-entertainment center in 5 years.

Answer 1

Answer:

i.e. an amount of 1851.85 dollars should be put in this CD

Step-by-step explanation:

Given that a bank offers a CD that pays a simple interest rate of 7.0​%

We have to find the amount that must you put in this CD now in order to have ​$2500 for a​ home-entertainment center in 5 years.

Here Principal + Interest after 5 years at rate of interest 7% should become = 2500

Simple interest for principal P for 5 years @7% = $\frac{PTR}{100} \\=\frac{x35P}{100} \\=0.35P$

Total amount at the end of 5 years = P+0.35P = 1.35P

This must equal 2500

i.e.

$1.35P =2500\\P = \frac{2500}{1.35} =1851.85$

i.e. an amount of 1851.85 dollars should be put in this CD

Answer 2

Answer: the amount she must invest is $1852

Step-by-step explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the amount invested.

P represents the principal or amount invested.

R represents interest rate

T represents the duration of the investment in years.

From the information given,

I = 2500 - P

R = 7%

T = 5 years

Therefore,

2500 - P = (P × 7 × 5)/100

2500 - P = 0.35P

0.35P + P = 2500

1.35P = 2500

P = 2500/1.35

P = 1852