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
$1722.24
B
$ 6922.24
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 $5200 in a savings account with an annual interest rate of 7.36 %. We want to calculate the balance after 54 months. Keep in mind that 54 months represents 5412 years and that 7.36 % is written in decimal form as 0.0736.
P= 5200, r= 0.0736, t= 54/12
To calculate the interest, we will substitute these values into the simple interest formula and evaluate the right-hand side.
After 54 months, the interest accrued is $1722.24.
In Part A, we found that the interest accrued after 54 months is $1722.24. The new balance of the account is the sum of the old balance and the accrued interest.
$ 5200+ $ 1722.24=$ 6922.24
The balance of the account after 54 months is $ 6922.24.
