Problem
You deposit $4 into a bank account paying 5% simple interest per month. You left the money in for 3 years. Find the interest earned and the amount at the end of those 3 years?
Result
The interest is <span>$7.2 </span>and the amount is $11.2.
Explanation
STEP 1: Convert interest rate of 5% per month into rate per year.
<span>rate per year = rate per month⋅12=5%⋅12=60%</span>
STEP 2: Find an interest by using the formula <span>I=P⋅i⋅t</span>, where I is interest, P is total principal, i is rate of interest per year, and t is total time in years.
In this examplee P = $4, i = 60% and t = 3 years, so
<span><span>III</span><span><span>=P⋅i⋅t</span><span>=4⋅0.6⋅3</span><span>=7.2</span></span></span>
STEP 3: Find an amount by using the formula <span>A=P+I</span>.
Since P = $4 and I = $7.2 we have
<span><span><span>AAA</span><span><span>=P+I</span><span>=4+7.2</span><span>=11.2</span></span></span></span>
