Question

Elen deposited $2,500 into a savings account that earns 5% interest per year. Her friend's bank offerS a 6% annual interest rate. How much more money would Ellen's money have earned in one year if she had deposited her money at her friend's bank?

Answer 1

Ellen's money would have earned $25 more than her money at her account

Explanation:

* Lets explain how to solve the problem

- The simple Interest Equation (Principal + Interest) is:

A = P(1 + rt) , Where

# A = Total amount (principal + interest)

# P = Principal amount

# r = Rate of Interest per year in decimal r = R/100

# t = Time period involved in months or years

* Lets solve the problem

- Ellen deposited $2,500 into a savings account that earns 5% interest

per year

- Her friend's bank offers a 6% annual interest rate

* Lets calculate her money after 1 year in each account

# Her account

∵ P = $2500

∵ r = 5/100 = 0.05

∵ t = 1

∵ A = P(1 + rt)

∴ A = 2500(1 + 0.05 × 1) = 2500 (1.05) = 2625

* Her money would be $2625 in one year

# Her friend's account

∵ P = $2500

∵ r = 6/100 = 0.06

∵ t = 1

∵ A = P(1 + rt)

∴ A = 2500(1 + 0.06 × 1) = 2500 (1.06) = 2650

* Her money would be $2650 in one year

∵ 2650 - 2625 = 25

∴ Ellen's money would have earned $25 more than her money at her

account