Question

Advertising A bank manager wants to encourage new customers to open accounts with principals ofat least $3,000. He decides to make a poster advertising a simple interest rate of 4.8%. What mustthe principal be if the bank manager also wants to advertise that one can earn $10 the first month?Can the poster correctly say, "Open an account of $3,000 and earn at least $10 interest in 1 month!"?The principal needs to be $1 to earn $10 in interest the first month.

Answer 1

Advertising A bank manager wants to encourage new customers to open accounts with principals of

at least $3,000. He decides to make a poster advertising a simple interest rate of 4.8%. What must

the principal be if the bank manager also wants to advertise that one can earn $10 the first month?

The principal needs to be $1 to earn $10 in interest the first month.

we know that

The simple interest formula is equal to

$I=P(rt)$

$I=P\mleft(rt\mright)$

where

I is the Final Interest Value

P is the Principal amount of money to be invested

r is the rate of interest

t is Number of Time Periods

Part b) Can the poster correctly say, "Open an account of $3,000 and earn at least $10 interest in 1 month!"?

in this problem we have

For

P=$3,000

r=4.8%=4.8/100=0.048

t=1 month=1/12 years

substitute in the formula above

$\begin{gathered} I=3,000(0.048\cdot\frac{1}{12}) \\ I=\ 12 \end{gathered}$

the answer is

Yes, the poster can say Open an account of $3,000 and earn at least $10 interest in 1 month!

Part a) What must the principal be if the bank manager also wants to advertise that one can earn $10 the first month?

For

I=$10

r=0.048

t=1/12 years

substitute in the formula and solve for P

$\begin{gathered} 10=P(0.048\cdot\frac{1}{12}) \\ 120=0.048P \\ P=\ 2,500 \end{gathered}$

answer is $2,500