Question

Which of the following equations will find the total account balance of the investment below?

Answer 1

To calculate simple intrest rate you have to apply the following formula:

`A=P\mleft(1+r\mright)^t`

Were

A: interest amount

P: principal investment

r: interest rate → always expressed as decimal value

t: time → normally in years

Once you calculated the amount A you have to add it to the initial balance to determine the balance at the end of the 10nth year:

P= $5000

r= 2.5 → 2.5/100=0.025

t=10 years

`\begin{gathered} A=P(1+r)^t \\ A=5000(1+0.025)^(10) \end{gathered}`

Answer is B.