Question

Albert has £500 in his savings account. His bank offers him a fixed 5% simple interest rate per annum, for a period of 5 years. How much interest will he have earned after 5 years?

Answer 1

He'll earn 125 in interest after 5 years.

Explanation:

Since it's a simple interest rate, we can use the formula to calculate the amount of interest he'll earn in those years. We have:

C = P*i*t

Where C is the amount of interest earned, P is the initial amount invested, i is the interest rate and t is the total time elapsed. For this case we have:

C = 500*0.05*5

C = 2500*0.05

C = 125

He'll earn 125 in interest after 5 years.