Question

Martin deposits $7,000 in an account at Victory Bank. Find the amount of interest

earned and the total value of his account after 36 months

Answer 1

$682.50

Explanation:

Simple interest only builds on the initial deposit.

Interest Formula

Unlike compound interest, the change per time period is constant for simple interest. This means that simple interest can be calculated through the formula:

• I = Prt

In this formula, I represents the amount of interest earned. P is the principle, which is the initial deposit. r is the rate of interest expressed as a decimal. t is the time in years.

Solving For Interest

Now, we can use the information we were given to solve for the amount of interest earned. The question states that the principle is $7,000. From the table, we can tell that the rate is 0.0325. Finally, t is 3 years because 36 months = 3 years. Then, plug these values into the formula.

• I = 7000 * 0.0325 * 3
• I = 682.5

This means that the account at Victory Bank would earn $682.50 over the course of 3 years.