Question

You receive an inheritance of $15,500, and you place the full amount into a bank account. The bank pays a simple interest rate of 7.5% per year. How much interest have you earned after three years?
Round your answer to the nearest dollar.

Do NOT round until you have calculated your final answer

Answer 1

To solve this we need to figure out what 7.5% of 15,500 is. (It’s 1162.5). Now we know that after one year it is a total of 16,662.5. We then figure out what 7.5% of 16,662.5 is, which is 1,249.6875. You then add that to 16,662.5 which comes out to 17,912.1875. We then figure out 7.5% of that is 1,343.4140625. We then add that to the last total which is 19,255.6015625 and we simplify that to 19,256 and we find out that the final total is $19,256. But it wants how much have we earned which means we need to subtract the original from the new, which is 3756 and we add a unit.

Meaning the final answer is $3,756.