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12 July, 18:55

A bank offers a cd that pays a simple interest rate of 4.5. how much must you put in this cd now in order to have 2500 for a home entertainment center in 4 years.

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  1. 12 July, 19:51
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    Principat amount to be invested = P = $ 2,118.64

    Equation:

    P = A / (1 + rt)

    r = R/100 (where R is the simple interest rate)

    r = 4.5%/100 = 0.045 per year

    A = amount required after 4 years = $2500

    t = time period = 4 years

    putting the values in equation

    P = 2500 / (1 + (0.045 * 4)) = 2118.6440677966

    P = $ 2,118.64

    The principal investment to get a total amount of $ 2,500 in 4 years is $ 2,118.64.
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