Answer:
$5,612.16
Step-by-step explanation:
Part 1) Account I earns 4% annual simple interest.
we know that
The simple interest formula is equal to A = P (1+rt)
where
A is the Final Investment Value
P is the Principal amount of money to be invested
r is the rate of interest
t is Number of Time Periods
in this problem we have:
t = 3 years
P = $2,500
r = 4% = 4/100 = 0.04
substitute in the formula above
A = 2,500 (1 + 0.04 * 3)
A = 2,500 (1.12)
A = $2,800
Part 2) Account II earns 4% interest compounded annually.
we know that
The compound interest formula is equal to: A = P (1 + r/n)nt
where
A is the Final Investment Value
P is the Principal amount of money to be invested
r is the rate of interest in decimal
t is Number of Time Periods
n is the number of times interest is compounded per year
in this problem we have
t = 3 years
P = $2,500
r = 4% = 4/100 = 0.04
n = 1
substitute in the formula above
A = 2,500 * (1 + 0.04/1)3
A = 2,500 * (1.04)3
A = $2,812.16
Part 3) What is the sum of the balances of Account I and Account II at the end of 3 years?
Sum the two final investment:
$2,800 + $2,812.16 = $5,612.16
