Question

How much would you need to deposit in an account now in order to have $2,500 in the account in 6 years? Assume the account earns 5.4% simple interest. Please answer ASAP!

Answer 1

Simple interest is computed using ...

... I = Prt . . . . . where P is the principal amount, r is the interest rate, and t is the lenght of time

The balance in the account is the principal plus the interest:

... P + I = P(1 + rt)

That balance is $2500, so we have

... $2500 = P(1 + 0.054·6) = 1.324P

... $2500/1.324 = P ≈ $1,888.22

The amount that must be deposited now is $1,888.22 in order for the balance to be $2,500 in 6 years.