Simple INterest

Question

Suppose you have $1,950 in your savings account at the end of a certain period of time. You invested $1,600 at a 5.34% simple annual interest rate. How long, in years, did you invest your money? State your result to the nearest hundredth of a year.

Answer 1

Simple Interest is calculated using:

I=P * r * t

where I is the interest earned

P is the principal or amount saved

r is the interest rate

t is the time invested in years

In this situation, P is $1600 , r is 0.0534 (5.34% in decimal form)

For this problem, each year you would receive :

I = 1600 * 0.0534 * 1 for one year

I = $85.44 in interest each year.

To determine the total interest earned for the entire period, subtract 1600 from 1950:

$1950-1600 = $350

The number of years to earn $350 at $85.44 earned each year would be found by dividing the two values:

350/85.44 = 4.097 years or to the nearest hundredth: 4.10 years