SOLUTION: Caitlin is a co-op student. She invested her work-term earnings of $10,000 at 4% simple interest, paid annually. She intends to use the money in a few years to take a dream vacatio

Question 1105315: Caitlin is a co-op student. She invested her work-term earnings of $10,000 at 4% simple interest, paid annually. She intends to use the money in a few years to take a dream vacation with a friend.
(a) How long will the investment take to grow to a future value of $12,000?
(b) Determine Caitlin�s rate of return.
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Caitlin is a co-op student. She invested her work-term earnings of $10,000 at 4% simple interest, paid annually. She intends to use the money in a few years to take a dream vacation with a friend.
(a) How long will the investment take to grow to a future value of $12,000?
A(t) = P(1+rt)
12000 = 10,000(1+0.04t)
2000 = 10000*0.04t
0.2 = 0.04t
t = 5 years
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(b) Determine Caitlin�s rate of return.
Interest = 0.04*5*10000
I = 2000
Rate = 2000/5 = $400 per year
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Cheers,
Stan H.
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