Premium Essay

Engineering Economy

In: Business and Management

Submitted By asaaqtalga2
Words 1292
Pages 6
1. John wants to have an interest income of $3,000 a year. How much must he invest for one year at 8%? i = prt
3000 = p × 0.08 × 1
3000 = 0.08p p = 37,500 2. Jane owes the bank some money at 4% per year. After half a year, she paid $45 as interest. How much money does she owe the bank? i = prt
45=p*0.04* 1/2
45 = 0.02p p = 2250 3. Robert deposits $ 3000 in State Bank of India for 3 year which earn him an interest of 8%.What is the amount he gets after 1 year, 2 years and 3 years?

Solution:

In every $ 100, Robert gets $ 8.

(Since rate is 8% → 8 for every 100)

Therefore, for $ 1 he gets = $ 8/100

And for $ 2000 he gets = 3000 x 8/100

= $ 240

Simple Interest for 1 year = $ 240.

Simple Interest for 2 year = $ 240 x 2

= $ 480

Simple Interest for 3 year = $ 240 x 3

= $ 720

Therefore, Amount after 1 year = Principal (P) + Simple Interest (SI)

= 3000 + 240

= $ 3240

Amount after 2 years = Principal (P) + Simple Interest (SI)

= 3000 + 480

= $ 3480

Amount after 3 years = Principal (P) + Simple Interest (SI)

= 3000 + 720 = $ 3720

We observe from the above example that, the Interest cannot be calculated without Principal, Rate and Time.

Therefore, we can conclude that Simple Interest (S.I.) depends upon:
Principal (P)

(ii) Rate (R)

(iii) Time (T)

And therefore, the formula for calculating the simple interest is

Simple Interest (SI) = {Principal (P) × Rate (R) × Time (T)}/100

Amount (A) = Principal (P) + Interest (I)

Principal (P) = Amount (A) – Interest (I)

Interest (I) = Amount (A) – Principal (P)

2. Richard deposits $ 5400 and got back an amount of $ 6000 after a year. Find the simple interest he got.

Solution:

Principal (P) = $ 5400,

Amount (A) = $ 6000

Simple Interest (SI) = Amount (A) – Principal (P)

= 6000 - 5400

= 600

Therefore, Richard got an…...

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