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Sasha's bank account earns 4% simple interest. How much must she deposit in the account today if she wants it to be worth $1,000 in 5 years?

Sagot :

If Sasha wants her account to be worth $1,000 in 5 years, then she must deposit $833.34.

What is simple interest?

Simple interest is a method of calculating interest on an amount for n period of time with a rate of interest of r. It is calculated with the help of the formula,

SI = PRT

where SI is the simple interest, P is the principal amount, R is the rate of interest, and T is the time period.

Sasha's bank account earns 4% simple interest. Therefore, if she wants it to be worth $1,000 in 5 years then the principal amount must be,

Account balance = PRT + P

$1,000 = P[(0.04×5)+1]

$1,000 = 1.2 P

P = $833.34

Hence, if Sasha wants her account to be worth $1,000 in 5 years, then she must deposit $833.34.

Learn more about Simple Interest:

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