Question

A new bank customer with ​$4 comma 500 wants to open a money market account. The bank is offering a simple interest rate of 1.5​%.
a. How much interest will the customer earn in 10 ​years?
b. What will the account balance be after 10 ​years?
a. The customer will earn ​$
nothing in interest.  

Answer 1

a) Simple interest earned by customer in 10 years is $ 675

b) Account balance after 10 ​years is $ 5175

Solution:

The simple interest is given by formula:

$Simple\ Interest = \frac{p \times n \times r}{100}$

Where,

"p" is the principal

"r" is the rate of interest

"n" is the number of years

a. How much interest will the customer earn in 10 ​years?

From given,

Principal = p = $ 4500

Simple interest rate = r =1.5 %

n = 10

Substituting the values in formula,

$Simple\ Interest = \frac{4500 \times 10 \times 1.5}{100}\\\\Simple\ Interest = 450 \times 1.5\\\\Simple\ Interest = 675$

Thus simple interest earned by customer in 10 years is $ 675

b. What will the account balance be after 10 ​years ?

Account balance = principal + simple interest

Account balance = 4500 + 675 = 5175

Thus account balance after 10 ​years is $ 5175