Problem:-
Graduation is 4 years away and you want to have $500 available for a trip. If your bank is offering a 4-year CD (certificate of deposit) paying 2.3% simple interest, how much do you need to put in this CD to have the money for your trip?
Solution:-
P: Principal, the amount you need to put in the CD
r: interest rate
t: time
A: total amount
________________________________
P(1+rt) = A
P(1+0.023×4) = 500
P(0.092) = 500
P = 500/0.092 = 5434.78
[Hence, you need $5434.78 to put in this CD to have the money for your trip ]
