How much interest does $2560 earn in 17 months at a rate of 5 1/8 ?
joan wants to start an IRA that will have $250,000 in it when she retires in 18 years. How much should she invest nnually in her IRA to do this if the interest is 4% compounded annually round to the nearest cent
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To calculate the interest earned, we need to use the formula:
Interest = Principal * Rate * Time
Here, the principal is $2560, the rate is 5 1/8 (or 5.125 as a decimal), and the time is 17 months.
First, let's convert the rate from a mixed number to a decimal:
5 1/8 = 5 + 1/8 = 5 + 0.125 = 5.125
Next, we need to convert the time to the same unit as the rate, which is in years. Since the time is given in months, we divide it by 12:
17 months ÷ 12 = 1.4167 years (rounded to four decimal places)
Now, we can substitute the values into the formula:
Interest = $2560 * 5.125 * 1.4167
Calculating this equation, we get:
Interest ≈ $1820.89
Therefore, the interest earned is approximately $1820.89.
I assume you mean simple interest at an annual rate of 5 1/8 %
5 1/8 % = 0.05125
17 months = 17/12 years.
$2560 * .05125 * 17/12 = $185.87