Final answer:
To find an account balance after 3 years with simple interest, use I = prt to calculate the interest, and add it to the principal (option A). For compound interest, use Future Value = Principal × (1 + interest rate)^time and subtract the principal from the future value to find the compound interest.
Step-by-step explanation:
To find your account balance after 3 years using simple interest, you can follow these steps:
- Use the formula I = prt to calculate the simple interest earned after 3 years, where I is the interest, p is the principal amount, r is the annual interest rate, and t is the time in years.
- Add the simple interest earned to the original principal amount to find the total future amount.
Therefore, the correct approach would be option A: First use I = prt to find the simple interest earned after 3 years. Then add that to the principal.
For compound interest, the process is different:
- Use the formula Future Value = Principal × (1 + interest rate)time to determine the future value including interest.
- To find the compound interest, calculate the difference between the future value and the present value of the principal.
This method accounts for interest on both the initial principal and the interest that has been added over time.
Finally, to apply these formulas to a three-year scenario, just substitute the number 3 for t (time) in your calculations.