If we borrow money from a bank, we pay the bank interest for the use of their money. Similarly, if we open a savings account, the bank deposits extra money on this account as interest. To calculate the interest I, we use the simple interest formula.
I= P r t, where...
I& = Interest
P& = Principal
r& = Annual interest rate
t& = Time (in years)We know that we deposit $1800 in a savings account with an annual interest rate of 6.5 %. We want to calculate the balance after 30 months. Keep in mind that 30 months represents 3012 years and that 6.5 % is written in decimal form as 0.065.
P= 1800, r= 0.065, t= 30/12
To calculate the interest, we will substitute these values into the simple interest formula and evaluate the right-hand side.
In Part A, we found that the interest accrued after 30 months is $292.50. The new balance of the account is the sum of the old balance and the accrued interest.
$ 1800+ $ 292.50=$ 2092.50
The balance of the account after 30 months is $ 2092.50.
