How much simple interest is earned if $2,000 is invested for 15 months at a nominal interest rate of 4.2%? What is the future value of this investment?
I = Prt = 2000 * 0.042 * (15/12) = 2000 * 0.042 * 1.25 = $105.00
2000
0.0421.25
105.00
A = P + I = 2000 + 105 = $2,105.00
2000
1052,105.00
Tom loaned Sally $3,000 with the understanding that she would pay him back $3,600 in three years. How much simple interest will Sally pay and what is the annual interest rate?
Solve the equation A = P + I for I:
I = A - P (Interest is the difference between what you get out of the investment and what you put into the investment.)
I = 3600 - 3000 = $600
3600
3000600
Solve the equation I = Prt for r:
r = I / (Pt) = 600 / (3000 * 3) = 0.066666...
0.066666...100 = 6.67% (rounded to two decimal
places)
600
30003
0.06666666671006.666666667
How long will it take an investment of $200 to amount to $250 at 6% simple interest?
I = A - P = 250 - 200 = 50
25020050
Solve the equation I = Prt for t:
t = I/(Pr) = 50/(200 * 0.06) = 4.166666 years.
4.166666 years * 12 months/year = 50 months.
502000.064.166666667
1250