The amount of money that must be loaned at six percent simpl

The amount of money that must be loaned at six percent simple interest per year to earn $47 in interest in two years is closest to: a. $392 b. $256 C. $42 d. $783

Solution

Answer: A) $392

Working notes for the above answer is as under :

A = P(1 + rt)

Where,

A= Amount after two year

P = Principal Amount

rt= rate of interest

Now we put the figures in to the formula as under

Let assume that principal Amount P=X

A = P(1 + (rt*2 year))

x+47 =x (1+(0.06*2 year))

x+47=x (1+0.12)

x+47=x+0.12x

47=x-x+0.12x

x=47/0.12

x=391.67

x=392

The amount that must be loaned for the period of two year =$392