Question

John inherited $5,000 from his grandfather. He put it in a savings account to buy a car when he turns 16. John is 13 right now. If his savings account earns 7% over the next 3 years, how much interest will he have earned?

Answer 1

`$1050`

Explanation:

To calculate interest the formula is : `Prt=i`
where P= Principle, r=rate as a decimal, t+ time in years.
(assuming simple interest)

`Prt=i`

`5000*0.07*3=i`

`i=$1050`

Answer 2

`$1050`

Explanation:

`color(blue)("Preamble")`

The question does not state if simple or compound interest.

Also the wording 'could' be interpreted to mean that: The total interest gain over the whole of 3 years is 7%. This would mean an annual interest of `7/3%`

Note that % is a bit like units of measurement but one that is worth `1/100`

So `" "7%-> 7xx%->7xx1/100=7/100`

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`color(blue)("Answering the question")`

Assumption: `ul("Annual simple interest")` is set at 7%.

dropping the $ sign for now.

`7%" of "$5000 ->7/100xx5000`

but 5000 is the same as `5xx10xx100` so we can write:

`(7xx5xx10xx100)/100 " "=" "7xx5xx10xx100/100`

but `100/100=1` so we end up with

`7xx5xx10xx1=350`

Now we put the $ back in giving `$350`

But this is for 1 year.

So 3 years is #3xx$350 = $1050