Question

Use the simplest interest formula to find the ending balance $5,000 at 5% for 4 years

Answer 1

ANSWER

Ending Balance = $6000

EXPLANATION

We want to use simple interest to find the ending balance.

This means that we have to find the interest and add it to the initial balance.

The formula for simple interest is:

$I=\text{ }\frac{P\cdot\text{ R }\cdot\text{ T}}{100}$

where P = principal = $5000

R = rate = 5%

T = number of years = 4 years

So, the interest on that amount is:

$\begin{gathered} I\text{ = }\frac{5000\cdot\text{ 5 }\cdot\text{ 4}}{100} \\ I\text{ = \ 1000} \end{gathered}$

So, the ending balance is the sum of the interest and the principal:

Ending Balance = 5000 + 1000

Ending Balance = $6000