Question

A new bank customer with ​$4 comma 500 wants to open a money market account. The bank is offering a simple interest rate of 1.5​%.

a. How much interest will the customer earn in 10 ​years?
b. What will the account balance be after 10 ​years?
a. The customer will earn ​$
nothing in interest.

Answer 1

a) Simple interest earned by customer in 10 years is $ 675

b) Account balance after 10 ​years is $ 5175

Solution:

The simple interest is given by formula:

`Simple\ Interest = (p * n * r)/(100)`

Where,

"p" is the principal

"r" is the rate of interest

"n" is the number of years

a. How much interest will the customer earn in 10 ​years?

From given,

Principal = p = $ 4500

Simple interest rate = r =1.5 %

n = 10

Substituting the values in formula,

`Simple\ Interest = (4500 * 10 * 1.5)/(100)\\\\Simple\ Interest = 450 * 1.5\\\\Simple\ Interest = 675`

Thus simple interest earned by customer in 10 years is $ 675

b. What will the account balance be after 10 ​years ?

Account balance = principal + simple interest

Account balance = 4500 + 675 = 5175

Thus account balance after 10 ​years is $ 5175