Question

Question 6 Marc deposits $840 into a savings account. The account pays 2% simple interest on an annual basis. If he does not add or withdraw money from the account, how much interest will he earn after 6 months? Round to the nearest cent. Need help with this question?

Answer 1

The initial deposit is PV=$840.

The annual interest rate is r=2% not compounded.

The period we are evaluating is 6 month, or n=0.5 years.

As the interest is not compounded, we can calculate the interest I can be calculated as:

`\begin{gathered} I=PV\cdot n\cdot r \\ I=840\cdot0.5\cdot0.02 \\ I=840\cdot0.01 \\ I=8.40 \end{gathered}`

Answer: the interest is $8.40.