Question

Aaden invests money in an account paying a simple interest of 2.5% per year. If no money will be added or removed from the investment, what should he multiply his current balance by to find his total balance in a year in one step?

Answer 1

1.025

Explanation:

You want to know the multiplier for one year for an investment earning 2.5% simple interest.

Simple interest

The simple interest formula is ...

A = P(1 +rt)

That is, the multiplier is (1 +rt), where r is the interest rate and t is the number of years.

The multiplier for r = 2.5% and t = 1 is ...

1 +rt = 1 + 0.025·1 = 1.025

Aaden can multiply is current balance by 1.025 to find his balance in a year.

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