Question

Mindy deposits $250 into a savings account that pays simple interest. If the interest rate is 1.5%, what is her account balance at the end of a 2 years if she makes no withdrawals?

Answer 1

Her account balance at the end of 2 years is $257.5.

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

After t years, the total amount of money is:

`T = E + P`

In this question:

Deposit of $250, so
`P = 250`

Interest rate of 1.5%, so
`I = 0.015`

2 years, so
`t = 2`

Amount of interest earned:

`E = P*I*t = 250*0.015*2 = 7.5`

Total amount:

`T = E + P = 7.5 + 250 = 257.5`

Her account balance at the end of 2 years is $257.5.