Shane invests $7,000 in bonds that earn simple interest of 3%. The interest is payable at the maturity of the bonds after 5 years. Find the total amount that Shane will receive at the end of 5 years
To find the total amount that Shane will receive at the end of 5 years, we need to calculate the simple interest earned on the investment and add it to the initial investment amount.
The formula to calculate simple interest is:
Interest = Principal x Rate x Time
Where:
- Principal is the initial investment amount
- Rate is the interest rate per period
- Time is the number of time periods the investment is held for
In this case:
- Principal (P) = $7,000
- Rate (R) = 3% or 0.03 (expressed as a decimal)
- Time (T) = 5 years
Using the formula, we can calculate the interest:
Interest = $7,000 x 0.03 x 5 = $1,050
Now, to find the total amount that Shane will receive at the end of 5 years, we need to add the interest to the initial investment amount:
Total amount = Principal + Interest = $7,000 + $1,050 = $8,050
Therefore, Shane will receive a total of $8,050 at the end of 5 years.