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15 February, 02:26

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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  1. 15 February, 02:59
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    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)
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