Your uncle just gave you a gift of $2,500. You are investing this money for 7 years at 0.8%...

Question:

Your uncle just gave you a gift of $2,500. You are investing this money for 7 years at 0.8% simple interest.

How much money will you have at the end of the 7 years?

Simple Interest:

When money is deposited in a bank and earns a fixed rate of interest, the amount multiplies over time. In simple interest, the interest earned is calculated just on the principal amount. Therefore, the amount accumulated in certain years in a deposit earning simple interest is always lower than the same amount earning compound interest.

Answer and Explanation:

.

Given -

  • Principal (P) = $2,500
  • Rate (r) = 0.8%
  • Time (t) = 7 Years

The formula to calculate the amount at the end of 7 years is as follows -

  • Amount = {eq}P * ( 1 + [ r * t ] ) {/eq}
  • Amount = {eq}2500 * ( 1 + [ 0.008 * 7 ] ) {/eq}
  • Amount = {eq}2,640 {/eq}

Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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