Question

solve
a bank offers a cd that pays a simple interest rate of 5%. how much must you put in this cd now in order to have $5600 to replace all the windows in your house in 8 years?
$1,600
$4,000
$3,200
$160

Explanation:

Step1: Recall simple interest formula

The formula for simple interest is $A = P(1 + rt)$, where $A$ is the final amount, $P$ is the principal (initial amount), $r$ is the annual interest rate (in decimal), and $t$ is the time in years. We know $A = 5600$, $r = 0.05$, $t = 8$, and we need to find $P$. Rearranging the formula to solve for $P$ gives $P=\frac{A}{1 + rt}$.

Step2: Substitute the values

Substitute $A = 5600$, $r = 0.05$, and $t = 8$ into the formula: $P=\frac{5600}{1+(0.05\times8)}$. First, calculate the denominator: $0.05\times8 = 0.4$, so $1 + 0.4 = 1.4$. Then, $P=\frac{5600}{1.4}=4000$.

Answer:

B. $4,000$