Question

Julie Fargus deposits $366 in a savings account at City Bank. The account pays an annual interest rate

of 5 percent. She makes no other deposits or withdrawals. After three months the interest is
calculated. How much simple interest does her money earn?

Answer 1

Julie Fargus earns $4.58 in simple interest after three months on her $366 deposit in a savings account at a 5% annual interest rate.

Step-by-step explanation:

To calculate the simple interest earned by Julie Fargus's $366 deposit at an annual interest rate of 5% after three months, we use the simple interest formula:

I = P x r x t

Where I is the interest, P is the principal amount ($366), r is the annual interest rate (5% or 0.05), and t is the time in years. Since the interest is calculated after three months, we convert three months to years by dividing by 12, which results in 0.25 years.

Now let's plug the values into the formula:

I = $366 x 0.05 x 0.25

The calculation will give us: I = $4.575.

Therefore, the simple interest that Julie's money earns after three months is $4.58 when rounded to the nearest cent.

The principal is the original amount deposited, and the simple interest is what Julie earns additionally over the initial deposit, without taking into account any compounded interest.