Question

Nancy has 120,000 in a bank savings account. The bank pays 4% simple interest a year. How much will his money earn after two years? How much money will he have after two years?

Answer 1

Given:

Principal (P) = $120,000

Interest Rate (r) = 4% annually or 0.04 annually

Time in years (t) = 2

Find: interest and the accumulated value after 2 years

Solution:

Since this is simple interest, the formula for getting the simple interest of a principal amount is:

`Interest=Principal* Rate* Time`

Since we already identified the principal, rate, and time in the given information, let's plug them into the formula.

`Interest=120,000*0.04*2`

Then, multiply the three of them.

`Interest=9,600`

The interest is $9, 600.

Therefore, after 2 years, Nancy will earn $9, 600 in his bank account.

Since Nancy already has $120,000 and he earned $9, 600, then Nancy will have a total of $129, 600 in his bank account after 2 years.

`\begin{gathered} A=Principal+Interest \\ A=120,000+9,600 \\ A=129,600 \end{gathered}`