Question

Suppose you locate an investment that pays 8% per year. If you invest $255, how much will you have at the end of the four years?

Answer 1

You will have $336.60 at the end of the 4 years, in total.

Explanation:

Simple consumer arithmetic:

Interest is money that is paid regularly at a particular rate for the use of money lent. In this case, the rate is 8% per annum, so every 12 months 8% of $255 will be paid to you as repayment for you investing your money in that particular investment.

Simple interest formula: `I=PRT`

Where `I=`amount of interest earned, `P=`principal (starting amount of money), `R=`rate of interest, and `T=`time that money is invested for.

Therefore, if we plug these numbers into this formula from the question, we will have the following equation:

`I=255 times 0.08 times 4`

(The rate is expressed as a decimal out of 1)

Therefore, the amount of interest earned = $81.60

BUT, the question is asking for the total amount of money you have at the end of four years. Well, you still have your starting amount ($255) plus the interest you earned over 4 years time ($81.60). So all we have to do is add these two numbers together to get the total amount of money you have at the end of the 4 years.

`$255+$81.60=$336.60`

Thus, you will have $336.60 at the end of the 4 years.