Answer:
a). The first $5,000 will be paid on January 1, 1982
b). The smaller scholarship that will be received=$2,800
Explanation:
a). This can be expressed as follows;
I=PRT
where;
I=Interest amount
P=Initial value of investment
R=Annual interest rate
T=number of years the money is invested for
In our case;
I= $5,000
P=$40,000
R=7%=7/100=0.07
T=t
Replacing;
5,000=40,000×0.07×t
5,000=2,800 t
t=5,000/2,800
t=1.786 years which will be 2 years since although the first amount will be in 1.7 years, the interest has to be paid on January 1 of the next year
1980+2=1982
The first $5,000 will be paid on January 1, 1982
b). What to receive after 1 year
I=PRT
where;
P=$40,000
R=7%=7/100=0.07
T=1
I=(40,000×0.07×1)=2,800
The smaller scholarship that will be received=$2,800