Question

mr. Wilkins deposited $2,500 in a new account at his bank the bank pays 6.5% interest compounded annually on this account mr. Wilkins makes no additional deposits or withdrawals what is the interest earned on this account

Answer 1

By formula,

`A=P(1+(r)/(100))^n`

Where A = amount =? P=Principal = $2,500, r = rate =6.5% and n= number of years = 1 year (Assumed)

Let assume the period of investment to be one year since the question is silent about the duration of the investment.

`A=2500(1+(6.5)/(100))^1=2500(1.065)=\text{ \$2,662.50}`

Recall: A = P + I .....eqn(1)

Making I the subject of the equation labeled eqn(1), we get,

I = A - P

I = 2662.50 - 2500 = $162.50

So, the interest on $2500 for the period of one year is $162.50