1. Julia deposited $250 in a savings account that earns 2.7% simple interest. How much interest has Julia earned by the end of the first year?
2. Armand deposited $389.42 in a savings account that earns 3.2% simple interest. What is Armand’s account balance after seven years?
3. Andy deposited $1,567.12 in a savings account that earns 1.9% simple interest. What will Andy’s account balance be in nine months?
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Interest earned with simple interest is just PV * i * t where PV is present value (the balance at the start of the problem), i is the interest rate expressed as a decimal (so divide the percentage by 100, 2.3% = 2.3/100 = 0.023), and t is the number of years (be sure to convert to years if you get something else). To find a future balance (FV), FV = PV + PV*i*t
1. PV = $250, i = 2.7% = 0.027, t = 1
interest earned = PV*i*t = $250*0.027*1 = $6.75
2. PV = $389.42, i = 3.2% = 0.032, t = 7
Here we want to find the FV, not the interest earned
FV = PV + PV*i*t = $389.42 + $389.42*0.032*t =
3. PV = $1,567.12, i = 1.9% = 0.019, t = 9 months = 9/12 = 0.75
Note that we had to convert months into years — the answer would be very incorrect if you did not do so!
Here we are finding the FV
FV = PV + PV*i*t = $1,567.12 + $1,567.12*0.019*0.75 =
You have to read these problems carefully to make sure you find the right quantity!