Question

You want to put $2,500 in a simple interest account.It has a 4% annual interest rate.How long will it take you to earn $200 in interest?

Answer 1

It will take 2 years.

Year 1 :
4% 2.5k = 2.5k/100 × 4 = $100 in interest

$2.5k + $0.1k = $2.6k

Year 2 :
4% 2.6k = 2.6k/100 × 4 = $104 in interest

$100 + $104 = $204 > $200

There may be a simpler way to solve this using a formula for example, but I just solved this step by step. Please feel free to ask if you have any questions