Question

Gina deposits $150 at the start of each year into a college savings account that pays 2% simple interest at the end of each year. She does not deposit the interest she earn each year. How much total interest will Gina Earn on her deposit through the end of the fifth year?

Answer 1

$45

Explanation:

Given the following :

Amount deposited in first year = $150

Interest rate (r) = 2% = 0.02

First year:

Simple Interest = principal * rate * time

= $150 * 0.02 = $3

2nd year:

Principal = $150 * 2 = $300

($300 * 0.02) = $6

3rd year:

Principal = $150 * 3 = $450

($450 * 0.02) = $9

4th year:

Principal = $150 * 4 = $600

(600 * 0.02) = $12

5th year:

Principal = $150 * 5 = $750

($750 * 0.02) = $15

Total interest earned :

$(3 + 6 + 9 + 12 + 15)

= $45