Question

Wally's grandmother started a college savings account for him with $3,000. What is the total amount of money in the account after 5 years if the annual simple interest rate is 3%?

Answer 1

$3,450

Step-by-step explanation

She started the savings account with $3,000.

The simple interest rate is 3% and the number of years is 5 years.

To find the amount of money in the account after 5 years, we have to first find the interest and then add it to the initial amount saved.

Simple Interest on an amount of money (Principal) at a rate R for a number of years T is given as:

`I\text{ = }\frac{\text{P }\cdot\text{ R }\cdot\text{ T}}{100}`

Therefore, the interest is:

`\begin{gathered} I\text{ = }\frac{3000\cdot\text{ 5 }\cdot\text{ 3}}{100} \\ I\text{ = \$450} \end{gathered}`

Therefore, the amount in the account after 5 years is:

Amount = Principal + Interest

Amount = 3000 + 450

Amoun = $3,450

That is the amount in the account.