Question

At Missouri Neighbor's Bank, they have a deal: 5%(0.05) interest Minimum deposit of $1000 At least a 5 year term If you chose this deal, how much money would be in your account at the end of 5 years?

Answer 1

If you deposit $1000 in an account with a 5% simple interest rate for a 5-year term, you would have $1250 at the end of the term. This is calculated by finding the simple interest of $1000 at 5% over 5 years ($250) and adding it to the original principal.

Step-by-step explanation:

When you deposit money into an account with a fixed interest rate, the amount of money you have at the end of a specific term can be calculated using the formula for compound interest, if the interest is compounded annually, or simple interest if it is not compounded. Since the question mentions a 5% interest over a 5-year term but does not specify compounding, the assumption is that it is simple interest. A minimum deposit of $1000 at a simple interest rate over 5 years would amount to:
Original Principal (P) = $1000
Annual Interest Rate (r) = 5% or 0.05
Number of Years (t) = 5

The simple interest (I) can be calculated as:

I = P × r × t

I = $1000 × 0.05 × 5 = $250

The total amount (A) in the account at the end of the term is the sum of the original principal and the interest earned:

A = P + I

A = $1000 + $250 = $1250

Therefore, with a minimum deposit of $1000 at a 5% simple interest rate, after 5 years, the total amount in the account would be $1250.