Carrie put $125 in an account for two years at 15% annual interest. How much money did Carrie have after two years?
2 Answers
Interest
Deposit
Final sum
Explanation:
The symbol % is a bit like a unit of measurement but 1 that is worth
So
Thus we have
What follows is one way of working it out in your head (for
So we have
but
so
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
but the above is for 1 year. So for 2 years we have:
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
for 2 years we have 2 lots of
If it is simple interest, she has $162.50 after 2 years.
She has $165.31 after 2 years if the interest is compounded.
Explanation:
For simple interest use the formula
Where
and
Substituting into the formula,
So with simple interest she has the amount she invested, $125, plus the interest she earned, $37.50, giving her a total amount of $162.50 in her account.
If the interest is compounded, use the compound interest formula
So
Therefore she has $165.31 after 2 years using compound interest.
(We call this the PAIN formula)