An investment earning 16% simple interest has a maturity value of $9,440.00 after eight months. What was the initial amount invested?
A) $8,530.12
B) $10,446.93
C) $7,228.92
D) $8,853.33
E) $7,780.22

Question

Quizplus · Accepted Answer

The maturity value of an investment is calculated as the sum of the principal (the initial amount invested) and the interest earned. The formula for simple interest is $I = P \times r \times t$, where $I$ is the interest, $P$ is the principal, $r$ is the annual interest rate, and $t$ is the time in years. Given a 16% annual interest rate and a time of 8 months (which is $\frac{8}{12}$ or $\frac{2}{3}$ of a year), we can set up the equation for the maturity value ($M$) as $M = P + I = P + (P \times 0.16 \times \frac{2}{3})$. Given that the maturity value is $9,440, we can solve for $P$ to find the initial investment. Rearranging and solving the equation gives us $P = \$8,530.12$.

An Investment Earning 16% Simple Interest Has a Maturity Value