Answer to Question #156771 in Financial Math for Kyle

Question

2. Pia invests $2500 in an account that earns simple interest. At the end of each month, she earns $11.25 in interest. a What annual rate of simple interest is Pia carning Round your answer to two decimal places. b) How much money will be in her account after 7 years? C. How long will it take for her money to double?

Answer 1

a) Calculate the interest $I$

$I=Prt$

$r=I/Pt =\frac{11.25}{2500\times 1/12}=0.054=5.4\%$

b)Calculate the total amount after 7 years

$A=P(1+rt)=2500(1+0.054\times 7)=\$3445$

c) Find $t$ such that, $A=2P$

$2P=P(1+rt)$

$2=1+rt$

t$=1/r=1/0.054=18.52years$