Question

Mrs. Adams deposited $12,000 into an account that earns an annual simple interest rate of 3.25%. She makes no other deposits or withdrawals.

How much interest will Mrs. Adams have earned at the end of 8 years?
$31,200.00

Answer 1

Mrs. Adams will earn $3,120 of interest at the end of year 8.

Explanation:

Simple Interest

In simple interest, the money earns interest at a fixed rate, assuming no new money is coming in or out of the account.

We can calculate the interests earned by an investment of value A in a period of time t, at an interest rate r with the formula:

`I=A.r.t`

Mrs. Adams deposited an amount of A=$12,000 into an account that earns an annual simple interest rate of r=3.25%. We must find the interest earned in t=8 years. The interest rate is converted to decimal as:

`r=3.25/100=0.0325`

The interest is then calculated:

`I=12,000\cdot 0.0325\cdot 8=3,120`

Mrs. Adams will earn $3,120 of interest at the end of year 8.