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# \$760 at 5% for 4 years how do you solve this answer

I've tries multiplying then multipling the days time years but come up with wrong answer

### 2 Answers by Expert Tutors

Kay G. | ~20 Years Accounting Tutoring Experience~20 Years Accounting Tutoring Experience
4.9 4.9 (32 lesson ratings) (32)
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There is no "day times years."  Interest rates are quoted annually unless otherwise stated.  So multiplying by "time" means either just multiplying by the years (no days involved), or multiplying by a proportion of a year if the term is less than a year.  (Like x 7/12 means 7 months out of 12 months total, or x 60/360 means 60 days out of 360 days total.  This gets the proportion of the year.)

Since you're just trying to do 2 multiplications and that's it, I'll assume for the moment you're doing simple interest, though you really need to state all the information.

Principle x rate x time
760 x .05 x 4

Note this gives you the interest.  Make sure of what you're solving for.  Are they asking for the interest, or the maturity value?

If it compounds annually, that would be M = P(1 + r)n, but that isn't 2 multiplications like you describe.
Jennifer E. | Mrs. Jennifer L.Mrs. Jennifer L.
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Simple interest is the process to use in this situation.  The first step is to change 5% into a decimal of 0.05.  Changing a percent to a decimal means moving a decimal or adding a decimal two places to the left of the last digit.  Now multiply the \$760 by the decimal of 0.05.  Take your answer and multiply that by the number of years.  This will tell you how much simple interest is earned in 4 years.