Bill Casler bought a $1000, 9-month certificate of deposit (CD) that would earn 8% annual simple interest. Three months before t
he CD was due to mature, Bill needed his CD money, so a friend agreed to lend him money and receive the value of the CD when it matured.
(a) What is the value of the CD when it matures?
value = ? $
(b) If their agreement allowed the friend to earn a 10% annual simple interest return on his loan to Bill, how much did Bill receive from his friend? (Round your answer to the nearest cent.) value = ?
(a) What is the value of the CD when it matures?
value = ? $
(b) If their agreement allowed the friend to earn a 10% annual simple interest return on his loan to Bill, how much did Bill receive from his friend? (Round your answer to the nearest cent.) value = ?
1 answer:
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Well, the formula for simple interest is
"I" is interest, "p" is the principal, "r" is the rate, and "t" is the time.
If you substitute the numbers, you get
When you multiply them together, you get
So, the simple interest for 3.5 years is $210.
But, in order to get the total balance, you have to add the interest and the principal together.
So, the balance after 3.5 years is $1,210.
"I" is interest, "p" is the principal, "r" is the rate, and "t" is the time.
If you substitute the numbers, you get
When you multiply them together, you get
So, the simple interest for 3.5 years is $210.
But, in order to get the total balance, you have to add the interest and the principal together.
So, the balance after 3.5 years is $1,210.