Simple Interest is the interest that is accumulated on a loan, savings, investment that is kept in a financial institution at a particular interest rate for a given time period.
The offer that would leave Kevin with more money after 6 years is the offer from Bank B
A = P(1 + rt)
Where:
P = Prinicpal (initial amount saved or invested) = $4,000
r = Interest rate
t = Time in years
A = Amount after time t
P = Prinicpal (initial amount saved or invested) = $4,000
r = Interest rate = 6%
t = Time in years = 6 years
A = Amount after time t = ?
First, converting R percent to r a decimal
r = R/100
= 6%/100
= 0.06 per year.
Solving our equation:
A = 4000(1 + (0.06 × 6)) = 5440
A = $5,440.00
The amount Kevin will have after 6 years from Bank A is $5,440.00
Step 1: Mifflin Harcourt Publishing Company Bank B offers a special account for new customers that will pay 7% simple interest for 3 years.
P = Prinicpal (initial amount saved or invested) = $4,000
r = Interest rate = 7%
t = Time in years = 3 years
A = Amount after time t = ?
First, converting R percent to r a decimal
r = R/100
= 7%/100
= 0.07 per year.
Solving our equation:
A = 4000(1 + (0.07 × 3)) = 4840
A = $4,840.00
Step 2: After the 3 years, Kevin would have to transfer all his earnings to a regular account that will pay 5% simple interest on the new transferred principal.
Hence, the new principal is $4,840
r = Interest rate = 5%
t = Time in years = 3 years
A = Amount after time t = ?
First, converting R percent to r a decimal
r = R/100
= 5%/100
= 0.05 per year.
Solving our equation:
A = 4840(1 + (0.05 × 3)) = 5566
A = $5,566.00
The amount Kevin will have from Bank B is $5,566.00
Therefore, the offer that would leave Kevin with more money after 6 years is the offer from Bank B
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