Andrea wants to deposit money into a bank account that earns 2.5% simple interest. Use the formula to find the amount of money that she should deposit so that she earns $2500 after 4.5 years. Show and explain your work.
I = PRT
2500 = P * 0.025 * 4.5
2500 = 0.1125P
22,222.25 = P
To find the amount of money that Andrea should deposit in the bank account, we can use the formula for simple interest:
I = P * r * t
Where:
I is the interest earned,
P is the principal amount (the amount deposited),
r is the interest rate,
and t is the time period.
In this case, we are given the following information:
I = $2500 (interest earned),
r = 2.5% (interest rate), and
t = 4.5 years (time period).
We need to solve for P, the principal amount. Rearranging the formula, we have:
P = I / (r * t)
Substituting the given values, we get:
P = $2500 / (0.025 * 4.5)
Calculating the denominator, we have:
P = $2500 / 0.1125
Simplifying the division, we find:
P ≈ $22,222.22
Therefore, Andrea should deposit approximately $22,222.22 into the bank account to earn $2500 in interest after 4.5 years.