Question

How much money will you have if you started with $1200 and put it in an account that earned 7.3% every year for 10 years?

Answer 1

You would have `$2076` after ten years.

Explanation:

First determine how much interest was earned over ten years. Then add the interest to the principal.

To determine interest earned over `10` years, use the following formula:

`I=Prt`,

where `I` is the interest, `P` is the principal, `r` is the interest rate in decimal form, and `t` is the time.

Convert `7.3%` to decimal form.

`r="7.3%="7.3/100="0.073`

`P=$1200`

`t="10 yr"`

Determine the amount of interest earned over `10` years.

`I=$1200xx0.073xx10=$876`

Add the interest to the principal.

`$876+$1200=$2076`

Answer 2

It depends on whether we're using simple interest or compound interest. Using simple interest, we will have $2076 after 10 years. With compound interest, we'll have $2427.61.

Explanation:

If the bank is using simple interest, then the answer is

`A = P+I`
`color(white)A=P + Prt`
`color(white)A=P(1 + rt)`
`color(white)A=$1200[1 + 0.073(10)]`
`color(white)A=$1200[1 + 0.73]`
`color(white)A=$1200[1.73]`
`color(white)A=$2076`

If the bank is using compound interest, then the answer is

`A=P(1+r/n)^(nt)`

where `n` is the number of times the compounding occurs in a year. (In this case, `n=1`.)

`A=$1200(1+0.073/1)^(1 times 10)`
`color(white)A=$1200(1.073)^10`
`color(white)A~~$1200(2.0230062)`
`color(white)A=$2427.61`