Question

Wilburs Grandmother opened a saving account for him on his 5th birthday. She deposited $100.00 in this account to open it. The account earns simple interest at an annual rate of 5%. If no further deposits or no withdrawals are made, What will be the Account balance after 5 years?

Answer 1

The account balance after 5 years, with an initial deposit of $100 earning simple interest at an annual rate of 5%, will be $125.

Step-by-step explanation:

The subject of this question is Mathematics, specifically focusing on interest calculations. As given in the provided examples, we can determine the final account balance after 5 years by calculating the simple interest earned on the initial deposit and adding it to the principal amount.

Simple Interest Calculation

Simple interest is calculated using the formula:
Interest = Principal × Rate × Time.

For Wilbur’s account:
Principal (P) = $100
Rate (R) = 5% or 0.05 (as a decimal)
Time (T) = 5 years

Accordingly, the simple interest earned over 5 years is:
Interest = $100 × 0.05 × 5 = $25

We add the interest earned to the original deposit to find the final account balance:

Account Balance = Principal + Interest
Account Balance = $100 + $25 = $125