Question

Sharla invests $275 in a simple interest bearing account for 16 years. The annual interest rate is 8%. Using the simple interest formula, mc001-1.jpg, how much interest will Sharla’s initial investment earn over the 16 year period?

Answer 1

$352

Explanation:

Answer 2

The formula to be followed for the calculation of simple interest is F = P (1 + in) where F is the future worth, P is the present worth, i s the annual interest rate and n is the number of years. In this case, F = $275 * (1+ 0.08*16) = $627. The interest earned is $627 - $275 equal to $352.