Question

John deposits $2000 into an account that pays simple interest at an annual rate of 2%. He does not make any more deposits. He makes no withdrawals until the end of 5 years when he withdraws all money

a.) how much total interest will john earn?
b.) what will the total amount in the account be (including interest?)

Answer 1

John will earn $200 in simple interest after 5 years on his $2000 deposit at an annual rate of 2%. The total amount in his account, including interest, will then be $2200.

Step-by-step explanation:

To calculate the simple interest that John will earn on his $2000 deposit at an annual rate of 2% over 5 years, we can use the simple interest formula:

I = P × r × t

• I is the interest
• P is the principal amount (the initial amount of money)
• r is the annual interest rate (in decimal form)
• t is the time the money is deposited for (in years)

In this case, P = $2000, r = 2% or 0.02, and t = 5 years.

Now, substituting these values into the formula:

I = $2000 × 0.02 × 5 = $200

This means that the total interest John will earn is $200.

To find the total amount in the account after 5 years (including interest), we simply add the interest earned to the principal amount:

Total amount = Principal + Interest

Total amount = $2000 + $200 = $2200

Therefore, after 5 years, John will have $2200 in his account.