Question

Beau's grandmother started depositing $500 in a savings account each

year in his birthday. The account pays 2.5% simple interest. How much
interest will the account earn after 3 years?
O $75
O $50
O $40

Answer 1

Given:

Beau's grandmother started depositing $500 in a savings account each year in his birthday

Rate of simple interest = 2.5%

Time = 3 years

To find:

The interest.

Solution:

Formula for simple interest:

`I=(P* r* t)/(100)`

where, P is principal, r is rate of interest and t is time in years.

Interest for first year is

`I_1=(500* 2.5* 1)/(100)`

`I_1=12.5`

New principal =
`500+500=1000`

Interest for second year is

`I_2=(1000* 2.5* 1)/(100)=12.5`

`I_2=25`

New principal =
`1000+500=1500`

Interest for third year is

`I_3=(1500* 2.5* 1)/(100)=12.5`

`I_3=37.5`

Total interest for 3 years is

`I=I_1+I_2+I_3`

`I=12.5+25+37.5`

`I=75`

So, interest after 3 years is $75.

Therefore, the correct options A.