We will investigate the application of simple interest on any amount of savings kept in a bank.
Andy has an initial principal ( P ) amount in her saving account as follows:
As per her contract her savings are to receive a Simple Interest Rate ( R ) annually of:
The time frame ( t ) over which the accumulated amount is to be determined is as follows:
To determine the amount of simple interest ( I ) accumulated at the end of the time period in consideration ( t ) as per rate ( R ) on her inital savings ( P ) can be determined from the following formula:
The above formula calculates an " additional amount " that she would have at the end of the time period ( t ). This additional amount depends on her initial savings ( P ) and the rate of return ( R ) offered by the bank.
We will use the above formula to determine the simple interest ( additional amount ) at the end of the time period as follows:
Therefore Andy's account would be further creditted by the simple interest amount ( I ) at the end of 3 years. We can add this amount into her initial principal amount saved to determine the accumulated amount at the end of 3 years that would be shown on her bank statement as follows:
Go ahead and plug in the respective results in the expression above as follows:
Hence, the amount in Andy's account after 3 years would be:
