Question

On your 5th birthday, your grandparents opened an investment account in your name and made an initial deposit of $2,500. The account pays 4.5 percent interest. How much will you have in the account on your 21st birthday if you don't add or withdraw any money before then?

Answer 1

Answer: $4,300

Explanation:

Firstly, we will get the interest after 16years

Using the formula for calculating simple interest

Interest = Principal×Rate×Time/100

Principal (initial deposit) is $2500

Rate is the percentage interest = 4.5%

Time (in years) will be 16years (since the savings started on my 5th birthday i.e 21-5)

Interest=2500×4.5×16/100

Interest= $1,800

Therefore, amount in the account on my 21st birthday will be Principal+Interest

$2,500+$1,800

= $4,300