Question

Lexi has $20 in a savings account that earns 10% interest per year. The interest is not

compounded. How much interest will she earn in 1 year?
Use the formula 1 = prt, where I is the interest earned, p is the principal (starting amount), r
is the interest rate expressed as a decimal, and t is the time in years.

Answer 1

She earns $2 in interest in 1 year.

Explanation:

Simple Interest

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

After t years, the total amount of money is:

`T = E + P`

Lexi has $20 in a savings account that earns 10% interest per year. The interest is not compounded.

This means that
`P = 20, I = 0.1`

How much interest will she earn in 1 year?

This is E when
`t = 1`. So

`E = P*I*t = 20*0.1*1 = 2`

She earns $2 in interest in 1 year.