Question

1. A new bank customer with $2,500 wants to open a money market account. The bank is offering a simple interest rate of 1.2%.a. How much interest will the customer earn in 30 years?b. What will the account balance be after 30 years?2. Boden's account has a principal of $500 and a simple interest rate of 3.2%. Complete the number line. How much money will be in the account after 4 years, assuming Boden does not add or take out any money?3. Monica deposits $400 into a savings account that pays a simple interest rate of 3.6%. Paul deposits $500 into a savings account that pays a simple interest rate of 3.1%. Monica says that she will earn more interest in 1 year because her interest rate is higher. Is she correct? Justify your response.

Answer 1

Remember that the formula for simple interest is:

`I=Prt`

Where:

• I = Interest

,

• P = Initial value

,

• r = Interest rate

,

• t = time (years)

Let's use this and the data from the problems to calculate what's asked:

Problem #1

a)

`\begin{gathered} I=(2500)((1.2)/(100))(30) \\ I=900 \end{gathered}`

The costumer would earn $900 in interest.

b)

`2500+900=3400`

The account balance be after 30 ​years would be $3400

Problem #2

After 4 years, the value of the account would be

`\begin{gathered} 500+(500)((3.2)/(100))(4) \\ \rightarrow564 \end{gathered}`

For the number line, put 4 in years and 64 in interest

Problem #3

Let's calculate the interest earned in 1 year for each one (M is Monica and P is Paul):

`\begin{gathered} M=400((3.6)/(100))(1)\rightarrow M=14.4 \\ P=500((3.1)/(100))(1)\rightarrow P=15.5 \end{gathered}`

Monica is wrong.