Question

Nikita invests $2,000 into a bank account with a 4% annual interest rate. In seven years, which is the most expensive item she could afford to buy?

Answer 1

Answer:

Anything that does not cost more than $2,560.00

Step-by-step explanation:

Provided that Nikita is spending money that she had invested and the amount  she collected over the period of 7 years. She can buy any item that costs no more than $2,560.00 but how?

It is a problem of simple interest:

Here the principal amount (P) = $2,000.00

Interest rate (r) = 4%

Time period (t) = 7 years

So, total amount that she would get by the end of 7 years is:

$A=P+SI$

$SI=\frac{P\times r\times t}{100}$

Plugging the values we get:

$SI=\frac{2000\times 4\times 7}{100}=560.00$

So the interest collected over 7 years is $560.00

Therefore, the total amount after 7 years is:

$\ 2000.00+\ 560.00=\ 2,560.00$

If Nikita is using this money then the most expensive item that she could buy will cost no more than $2,560.00.