Question

Robin Sparkles invests $3,760 in a savingsaccount at her local bank which gives 1.8%simple annual interest. She also invests$2,400 in an online savings account whichgives 5.3% simple annual interest. After fiveyears, which one will have earned moreinterest, and how much more interest will ithave earned, to the nearest dollar?

Answer 1

The formula for determining simple interest is expressed as

I = PRT/100

where

I = interest

P = principal or amount invested

T = time in years

R = interest rate

Considering the amount invested in her local bank,

P = 3760

R = 1.8

T = 5

I = (3760 x 1.8 x 5)/100 = 338.4

Considering the amount invested in online savings,

P = 2400

R = 5.3

T = 5

I = (2400 x 5.3 x 5)/100 = 636

After 5 years, the investment in the online savings account earned more interest.

The difference in interest earned is

636 - 338.4 = $298 to the nearest dollar

It has earned $298 more than the local bank's interest