Question

A bank advertises that they will pay 1.5% simple annual interest on new savings accounts. Lorenzo puts $400 in a new account. If he does not deposit it withdraw money, how much will he have altogether after one year?

Answer 1

$406

Explanation:

The amount of interest that Lorenzo's account earns is given by ...

I = Prt

where P is the principal amount ($400), r is the annual rate (1.5%) and t is the number of years (1).

Lorenzo's interest is ...

I = $400·0.015·1 = $6.00

Then the balance in Lorenzo's account at the end of one year is ...

$400 +6 = $406.00