Question

Ryan deposits $4,000 in an account that pays 3.5% simple interest for 3 years. Find a) what is the interest income after 3 years? B) What is the account balance after 3 years?

Answer 1

Intrest Income= 434.87, Account Balance= 4434.87

Explanation:

To solve this problem, we can use the exponential growth formula.

To find the decimal for 3.5%, divide it by 100. 3.5/100=0.035

The formula is F(T)= A(1+R)^T

A= Initial Amount

R= Regrowth rate

T= Time period

Now insert everything,

F(T)= 4000(1+0.035)^3

Now solve the problem,

4000(1.035)^3 (First do the exponent, then multiple)

1.035^3= approx 1.108717875 or 1.11

4000*1.108717875=

Our account balance is 4434.87, after 3 years.

4434.87-4000 will give us the interest income after three years,

The interest income is 434.87.