document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1105820>Question 1105820</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Mrs james invested $4000 in a building society which paid simple interest at a rate of 7.25% per annum to its investors. After 2 years the rate was increased to 7.6% per annum. Find the amount of money she had at the end of 7 years. </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #720717 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=720717\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> she invested 4000 at 7.25% simple interest per year for 2 years and then 7.69% interest for 5 years.\r<BR>\n" );
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document.write( "there are two ways of looking at this.\r<BR>\n" );
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document.write( "first way is the original investment stands for 7 years.\r<BR>\n" );
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document.write( "second way is she withdraws her money after 2 years and then re-invests it for remaining 5 years.\r<BR>\n" );
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document.write( "first way would be calculated as follows:\r<BR>\n" );
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document.write( "4000 * .0725 = 290 interest for the first 2 years.<BR>\n" );
document.write( "4000 * .0760 = 304 interest for the next 5 years.\r<BR>\n" );
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document.write( "total interest is 290 * 2 + 304 * 5 = 2100.\r<BR>\n" );
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document.write( "add that to the principal of 4000 and she has 6100 at the end of 7 years.\r<BR>\n" );
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document.write( "second way would be calculated as follows:\r<BR>\n" );
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document.write( "4000 * .0725 = 290 interest for the first 2 years.\r<BR>\n" );
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document.write( "at the end of the first 2 years, she has 4000 + 2 * 290 = 4580.\r<BR>\n" );
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document.write( "she then turns around and re-invests that 4580 at .0760 interest for the next 5 years.\r<BR>\n" );
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document.write( "4580 * .0760 = 348.08 interest for the next 5 years.\r<BR>\n" );
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document.write( "at the end of the 5 years, she has 4580 + 5 * 348.08 = 6320.4.\r<BR>\n" );
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document.write( "first way is one investment with changing interest rate after 2 years.\r<BR>\n" );
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document.write( "second way is two investments; one for 2 years and then another for 5 years.\r<BR>\n" );
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document.write( "technically, in the second way, you are earning interest on interest which is not simple interest, but interest compounded after the second year.\r<BR>\n" );
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document.write( "consequently, if it is pure simple interest, i would go with the first way.\r<BR>\n" );
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document.write( "you should check with your instructor to see which way they are assuming.\r<BR>\n" );
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document.write( " </SPAN>\n" );
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