Final answer:
By using the formula for simple interest (I = P x r x t), we calculate the interest on a $2000 investment at an APR of 7% over 20 years to be $2800. The total balance after 20 years would therefore be $4800.
Step-by-step explanation:
If you invest $2000 in a savings account that pays an annual percentage rate (APR) of 7% with simple interest, to find the balance after 20 years, you use the formula for simple interest which is I = P x r x t, where I stands for the interest, P is the principal amount (initial investment), r represents the annual interest rate in decimal form, and t is the time in years.
For your specific question:
- P = $2000
- r = 7/100 = 0.07 (since you need to convert percentage into a decimal)
- t = 20 years
So, the interest earned over 20 years would be: I = $2000 x 0.07 x 20 I = $2800
The total balance in the account would be the sum of the original investment plus the interest earned. That is:
Total Balance = P + I
Total Balance = $2000 + $2800
Total Balance = $4800
Therefore, the balance in the account after 20 years, with simple interest, would be $4800.