Question

How much to the nearest dollar should you deposit in a savings account at 2.5% annual simple interest in order to have a balance of $20,000 after five years?

Answer 1

Answer:

The amount we have to deposit in a savings account x = $ 17777.78

Step-by-step explanation:

Amount = $ 20000

R = 2.5 %

Time = 5 years

Take principal amount = x

Simple interest earned in five years

S.I. = $\frac{P R T}{100}$

$S.I. = \frac{P (2.5)(5)}{100}$

$S.I. = \frac{x}{8}$   ------- (1)

We know hat total amount is given by

Total amount = principal amount + simple interest

A = x + S.I.

$A = x + \frac{x}{8}$

$A = \frac{9x}{8}$

Given that the total amount after 5 years is = $ 20000

$\frac{9x}{8} = 20000$

x = $ 17777.78

This is the amount we have to deposit in a savings account.