Question

A retiree invests $5,000 in a savings plan that pays 7% per year. What will the account balance be at the end of the first year?

Answer 1

According to the given problem,

`\begin{gathered} P=5,000 \\ R=7 \\ T=1 \end{gathered}`

Note that the interest cooresponding to the first year is same, whether calculated as simple interest plan, or compound interest plan.

So the interest can be calculated using any of the formula.

`\begin{gathered} SI=(P\cdot R\cdot T)/(100) \\ SI=(5000*7*1)/(100) \\ SI=50*7 \\ SI=350 \end{gathered}`

Then the amount A is calculated as,

`\begin{gathered} A=P+SI \\ A=5000+350 \\ A=5350 \end{gathered}`

Thus, the account balance will be $5350 at the end of the first year.