Question

A new bank customer with $5000 wants to open a money market account. The bank is offering a simple interest rate of 1.9%. A.How much interest will the customer earn in 10 years? b.What will the account balance be after 10 years?

Answer 1

A new bank customer with

P = $ 5000

The bank is offering a simple interes rate

r = 1.9%

a) how much interes will the customer earn in 10 years

A = P(1 + rt)

t = 10 years

Calculation:

First, converting R percent to r a decimal

r = R/100 = 1.9%/100 = 0.019 per year.

Solving our equation:

A = 5000(1 + (0.019 × 10)) = 5950

A = $5,950.00

I = A - P = $950.00

b) After 10 years the account balance will be

The total amount accrued, principal plus interest, from simple interest on a principal of $5,000.00 at a rate of 1.9% per year for 10 years is $5,950.00.