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

20000.0421.25**105.00**

A = P + I = 2000 + 105 = $2,105.00

2000105**2,105.00**

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

36003000**600**

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)

60030003**0.0666666667**100**6.666666667**

How long will it take an investment of $200 to amount to $250 at 6% simple interest?

I = A - P = 250 - 200 = 50

250200**50**

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.

502000.06**4.166666667
**12**50**