Question

Carmelo puts $2,200.00 into savings bonds that pay a simple interest rate of 3.4%. How much money will the bonds be worth at the end of 5.5 years?

Answer 1

Hello there! So, the first thing we do when solving these types of problems is to find the interest rate. Because this is simple interest, the amount earned will be constant. The formula for this is I = prt. The principle is the $2,200. The rate earned per year is 3.4%. 2,200 * 3.4% (0.034) is 74.80. That's $74.80 worth of interest each year. The amount of time is 5.5 years. 74.8 * 5.5 is 411.4. Carmelo will earn $411.40 worth of interest in 5.5 years. However, that's not all. We are looking for the total amount of his bonds, which means add the interest and his initial amount in the bank. 2,200.00 + 411.40 is 2,611.4. Carmelo's saving bonds will be worth $2,611.40 at the end of 5.5 years.