Question

Since your first birthday, your grandparents have been depositing $140 into a savings account every month. The account pays 12% interest annually. Immediately after your grandparents make the deposit on your 18th birthday, the amount of money in your savings account will be closest to ________.

Answer 1

Answer:

The correct answer is: $5,140.80.

Explanation:

Simple Interest is a quick method of calculating the interest charged on a loan or the interest accrued out of an investment. It is determined by multiplying the interest rate by the principal by the number of periods. It is one of the most common methods used in finance to calculate the return on certain investments.

In the example, the number of years considered to calculate the interest is 17 because the 18th year on interest is realized by the end of that year. Thus:  

• Deposit per year: $140
• Interest per year: $140 x 12% = $16.80
• Interest accrued: $16,8 x 17 = $285.60

• Total savings: (Deposit per year x number of years) + interest accrued
• Total savings: ($140 x 18) + $285.60
• Total savings: $5,140.80