Question

Enter your answer and show all the steps that you use to solve this problem in the space provided.

Yvonne put $4,000 in a savings account. At the end of 3 years, the account had earned $960 in simple interest.
How much does she have in her account at the end of 3 years?
At what annual simple interest rate did the account grow? Show your work.
How many more dollars would she have in her account if the interest rate were 1% greater? Show your work

Answer 1

1. $4,960

2. $320

3. $120

Explanation:

given:

savings account or the Principal = $4,000

interest earned in 3 years = $960

find:

1. How much does she have in her account at the end of 3 years?

2. at what annual simple interest rate did the account grow?

3. How many more dollars would she have in her account if the interest rate were 1% greater?

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solution:

1. P + I = total in 3 years

= $4,000 + $960

= $4,960

2. Annual simple interest: I = P r t

where

I = interest = $960

P = Principal = $4,000

r = rate

plugin values into the formula:

$960 = $4,000 ( r ) 1 year

r = 0.08 ( 8 % )

so the annual simple interest = $4,000 ( 0.08 ) 1

annual simple interest = $ 320

3. 8% rate + 1% = 9%; I = P r t

I = $4,000 ( 0.09 )3

I = $1080

so the difference = $1080 - $960

= $120