Question

Note: Enter your answer and show all the steps that you use to solve this problem in the space provided.

Answer 1

Answer:

  A. $4,960

  B. 8%

  C. $120

Step-by-step explanation:

Part A

The amount in the account at the end of 3 years is the original amount ($4000) plus the earned interest ($960). That sum will be ...

  $4,000 + 960 = $4,960 . . . account balance

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Part B

The amount of interest is computed using the formula ...

  I = Prt

where I is the interest earned, P is the principal invested, r is the annual rate, and t is the number of years. Putting the given values into this equation, we can solve for r:

  960 = 4000·r·3

  960/12000 = r = 0.08 = 8%

The interest rate was 8%.

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Part C

The additional interest can be computed using the same formula as for part B.

  I = Prt

  I = 4000·0.01·3 = 120

The additional interest earned at a 1% higher rate would be $120.