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Jesse estimates that it will cost $300,000 to send his newborn son to a private college in 18 years. He currently has $65,000 to deposit in an account. What simple interest rate would he need so that $65,000 grows into $300,000 in 18 years? round to the nearest percent.

Answer :

ONEERAGO

The simple interest rate would be 20%. The result is obtained by using the simple interest formula.

How to count the interest?

The interest of an amount of money can be counted by the following formula.

I = P₁ - P

I = P × r × t

Where

  • I = interest
  • P = principal amount (initial balance)
  • P = final balance
  • r = simple interest rate
  • t = time period

Jesse now has $65,000 and he deposit it in an account. After 18 years, he wishes the balance will grow into $300,000. Determine the simple interest rate!

First, let's find the interest.

I = P₁ - P

I = $300,000 - $65,000

I = $235,000

The simple interest rate is

I = P × r × t

235,000 = 65,000 × r × 18

r = 235,000 / 1,170,000

r = 0.201

r ≈ 20%

Hence, the simple interest rate he would need to deposit his money is 20%.

Learn more about interest on deposit here:

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