Question

XYZ just deposited $3,700 in an account that will earn 7.1 percent per year in compound interest for 9 years. If Svetlana deposits $4,000 in an account in 3 years that earns simple interest, then how much simple interest per year must Svetlana earn to have the same amount of money in 9 years from today as XYZ will have in 9 years from today

Answer 1

Answer:

11.92%

Explanation:

The computation of the simple interest per year is shown below:

Future value would be

= Deposited Amount × (1 + rate of interest)^years

= $3,700 × (1 + 7.1%)^9

= $6,859.73

Now the simple interest is

= (Future value ÷ deposit) - 1 ÷ number of year

= ($6,859.73 ÷ $4,000)  - 1 ÷ 9

= 0.71493 ÷ 9

= 11.92%