Multiple choice

What was the initial investment if a retiree's annual interest earnings dropped by $480 when the rate fell from 6.5% to 5%?

  1. $30,000
  2. $32,000
  3. $34,000
  4. $36,000
  5. $38,000
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Let P be the investment. (0.065 - 0.05) * P = 480. 0.015 * P = 480. P = 480 / 0.015 = 32000.

AI explanation

Use the formula for the difference in interest, which is Initial Investment multiplied by the difference in rates. The drop in annual interest is \$480 and the rate fell by 1.5% (from 6.5% to 5%). This gives us 0.015 times the principal equals 480. Therefore, the initial investment is 480 divided by 0.015, which equals \$32,000.

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