Use the simple interest formula I=Prt, where I is the interest, P the principal, r the annual interest rate, and t the time in years.
B
The new balance of the account is the sum of the old balance and the accrued interest.
A
$ 51.06
B
$ 976.06
Practice makes perfect
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 $925 in a savings account with an annual interest rate of 2.3 %. We want to calculate the balance after 2.4 years. Keep in mind that 2.3 % is written in decimal form as 0.023.
P= 925, r= 0.023, t= 2.4
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 2.4 years is $51.06. The new balance of the account is the sum of the old balance and the accrued interest.
$ 925+ $ 51.06=$ 976.06
The balance of the account after 2.4 years is $ 976.06.
