Question

4. The simple interest on a savings account is directly proportional to the amount of the investment.

A savings account with $6,000 earns $75.00 after 1 year. Find a mathematical model that gives the
interest Nafter 1 year in terms of the amount invested P, then calculate the simple interest after
saving an amount of $10,500.

Answer 1

Simple interest can be modeled with the equation A = P(1 + rt).
For your problem, we can simplify this a bit to
N = P x R x T
Which just means principal x rate x time

First, let's figure out what interest rate we're getting. We can use our equation to solve for that by substituting each variable with the known amount:

75 = 6000 x R x 1

That simplifies to:
75 = 6,000 x R
0.0125 = R
( Or 1.25%)

To calculate the interest for a new principal, just plug the new numbers into the same equation:

N = 10,500 x 0.0125 x 1
N = $131.25