Question

The equation, 687.5 = 550(1 + 0.05t), represents the amount of money earned on a simple interest savings account. What does the value 550 represent?

The value 550 represents the initial balance in the account, which means the account started with $550.
The value 550 represents the final balance in the account, which means the account balance ended with $550.
The value 550 represents the final balance in the account, which means the account balance started with $550.
The value 550 represents the amount of interest earned, which means $550 was added to the initial balance.

Answer 1

(a) The value 550 represents the initial balance in the account, which means the account started with $550.

Explanation:

You want the meaning of 550 in the simple interest expression 687.5 = 550(1 + 0.05t).

Simple interest

The formula for computing the amount A of an account earning simple interest at annual rate r on its initial balance P for t years is ...

A = P(1 +rt)

Comparing this formula to the given equation, we see ...

687.5 = 550(1 +0.05t)

• A = 687.5
• P = 550 . . . . the initial balance
• r = 0.05

The initial balance (starting amount) was 550.