Question

William wants to invest $30,000 in a mutual fund.

a) Bank A has an annual interest rate of 6.5% for 5 years. How much money will he have

at the end of the 5 years? $

Answer 1

He will have $39,750 at the end of five years.

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:

`P = 30000, I = 0.065, t = 5`

Interest earned:

`E = P*I*t = 30000*0.065*5 = 9750`

Total amount:

`T = E + P = 9750 + 30000 = 39750`

He will have $39,750 at the end of five years.