Question

Brady deposited $600 into a new savings account that earns 2.5% simple interest. If Brady makesno other deposits or withdrawals, how much interest will the account have earned after 5 years?

Answer 1

In order to determine the interest earnt after 5 years, use the following formula for the simple interest:

I = P·r·t

where

P: prinpal investment = $600

r: annual interest rate = 2.5% = 0.025

t: time = 5 years

replace the previous values of the parameters into the formula for I:

I = ($600)(0.025)(5)

I = $75

Hence, the account will have an interest of $75 after 5 years