Practice!

Sample Problem

You have invested in a company that sells invisibility cloaks. By investing $10,000 in the “Ron Weasley” bond, you obtained an interest payment of $388.25 after 1 year. Find the mathematical model that gives the interest I for this municipal bond after 1 year in terms of the amount invested P. (note: the simple interest on an investment is directly proportional to the amount of the investment)

I=P (give your answer in the exact decimal form)

Solution

Since we know that the interest is directly proportional to the investment amount, the calculation is simple (just plug in the numbers and solve for k).

I=kP

388.25=k(10,000)

K=388.25/10,000=.038825