Question

Sam opened a money-market account that pays 2% simple interest. He started the account with $7,000 and made no further deposits. When he closed the account, he had earned $420 in interest. How long did he keep his account open?

Answer 1

Answer:  $7,420.00 = 3 years
(I = A - P = $420.00)

Equation:
A = P(1 + rt)
Calculation:
First, converting R percent to r a decimal
r = R/100 = 2%/100 = 0.02 per year.

Solving our equation:
A = 7000(1 + (0.02 × 3)) = 7420 
A = $7,420.00

The total amount accrued, principal plus interest, from simple interest on a principal of $7,000.00 at a rate of 2% per year for 3 years is $7,420.00.