a letter to the editor of a local newspaper complain that $775,000 "wasted" on a useless"economic development study could have been better used. The writer claims that "if the moneyhad been invested on 4% interest, it could have provided enough money to keep an additionalcop on the streets for the next 20 years!" assuming a level cost per year over the next 20 years, what is the writer assuming it costs to pay a police officer for a year?

Question

Business

Amari Ballard

18 December, 21:17

a letter to the editor of a local newspaper complain that $775,000 "wasted" on a useless"economic development study could have been better used. The writer claims that "if the moneyhad been invested on 4% interest, it could have provided enough money to keep an additionalcop on the streets for the next 20 years!" assuming a level cost per year over the next 20 years, what is the writer assuming it costs to pay a police officer for a year?

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Answers (1)

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Waylon Soto · Answer 1

The answer is $40,300

Explanation:

In order to calculate this, we will first of all calculate the interest earned on the invested amount, and this is done as follows:

principal = $775,000

rate = 4% = 0.04

∴ Interest earned = 0.04 * 775,000 = $31,000

Therefore final value of the invested amount = 31000 + 775000 = $806,000

Next we are asked to calculate how much it will take to pay a police officer for 20 years, at a level cost per year. This is done by dividing the final value of the invested amount by 20, and it is shown as follows:

cost per year = final value : number of years

= 806,000 : 20 = $40,300