Final answer:
Old Time Savings Bank pays 3% simple interest on its savings accounts. For an initial deposit of $1,800, the interest earned each year, including the first, second, and tenth year, is $54.00 since the interest does not compound over time.
Step-by-step explanation:
When computing the interest earned on a savings account with a simple interest rate of 3%, we can use the simple interest formula I = Prt, where I is the interest, P is the principal amount, r is the interest rate per period, and t is the time in years.
a. Interest Earned in the First Year:
Principal (P): $1,800
Annual Interest Rate (r): 3% or 0.03
Time (t): 1 year
Interest (I) = P * r * t = $1,800 * 0.03 * 1 = $54
The interest earned in the first year is $54.00.
b. Interest Earned in the Second Year:
The interest for each subsequent year remains the same in simple interest, as it does not capitalize on the prior years' interest. It will again be $54.00.
c. Interest Earned in the 10th Year:
Following the same logic, the interest in the 10th year remains $54.00 since there is no compounding in simple interest.