Question

How much interest would you receive on a deposit of $525 for three months at a rate of 4.5%?

Round your answer to the nearest cent. Enter your answer in number form only. Do not attach a label.

Answer 1

$5.91 (nearest cent)

Explanation:

`\boxed{\begin{minipage}{7 cm}\underline{Simple Interest Formula}\\\\$ I=Prt$\\\\where:\\\\ \phantom{ww}$\bullet$ $I =$ interest accrued \\ \phantom{ww}$\bullet$ $P =$ principal amount \\ \phantom{ww}$\bullet$ $r =$ interest rate (in decimal form) \\ \phantom{ww}$\bullet$ $t =$ time (in years) \\ \end{minipage}}`

Given values:

• P = $525
• r = 4.5% = 0.045
• t = 3 months

As the value of t has been given in months, we need to convert it to years before inputting it into the formula.

`\sf \implies 3\; months=(3)/(12)\;year=(1)/(4)\; year`

Therefore, the values to input into the formula are:

• P = $525
• r = 4.5% = 0.045
• t = 1/4 year

Substitute the values into the formula and solve for I:

`\implies I=525 \cdot 0.045 \cdot (1)/(4)`

`\implies I=23.625 \cdot (1)/(4)`

`\implies I=5.90625`

Therefore, the amount of interest you would receive on a deposit of $525 for three months at a rate of 4.5% is $5.91 (nearest cent).

Answer 2

$5.91

Explanation:

The amount of simple interest gained from a sum of money can be represented as:

`\textrm{Interest} = P\cdot r\cdot t`

where
`P` is the principal amount (original sum of money),
`r` is the rate of simple interest per time period, and
`t` is the period of time in relation to a year.

To solve this problem, we simply have to plug the given values into the above formula and round the result to the hundredths place (cents).

`P = \$525`,
`r = \frac{4.5\%}{\textrm{month}}`,
`t = 3 \textrm{ months} = (1)/(4) \text{ year}`

`\textrm{Interest} = \$525 \cdot 4.5\% \cdot (1)/(4)`

`\boxed{\textrm{Interest} \approx \$5.91}`