A bank offers a CD that pays a simple interest rate of 5.5%. How much must you put in this cd now in order to have $8000 for a kitchen remodeling project in two years?

Question

Mathematics

Zoie Brown

17 February, 15:08

A bank offers a CD that pays a simple interest rate of 5.5%. How much must you put in this cd now in order to have $8000 for a kitchen remodeling project in two years?

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Answers (1)

Know the Answer?

Edward Stanley · Answer 1

The correct answer is: $7207.207

Explanation:

The formula to find the amount that involves simple interest is:

A = P (1+rt) - - - (1)

Where

A = Amount = $8000

P = Principal amount = ?

r = Annual interest rate in decimal form = 5.5% = 0.055

t = Loan period expressed in years = 2

Plug in the values in equation (1)

(1) = > (8000) = P * (1 + 0.055*2)

P = 8000/1.11 = $7207.207 (answer)