Question

Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, would you have more than $102, exactly $102 or less than $102?

More than $102
Less than $102
Exactly $102

Answer 1

Hey there! Hello!

For this problem, take the interest equation into account:
`I = Prt`.
`I` is the interest,
`P` is the principal amount that will be invested,
`r` is the rate of interest per year (expressed in decimal form, where 90% is 0.9, for example), and
`t` is the amount of time. Let's solve the amount of money gained from interest after one year:


`I = Prt`

`I=100*0.02*1`

`I=2`

That means 2 dollars are earned after one year. If $102 is the total after one year, and interest is earned yearly, it surely can't be $102 at the end of five years. So, let's solve for five years this time:


`I = Prt`

`I=100*0.02*5`

`I=10`

So, at the end of five years, $110 will be earned. This is more than $102 dollars, meaning that your first answer choice is the correct one.

Hope this helped you out! Feel free to ask me any additional questions you may have. :-)