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?
To calculate interest the formula is :
where P= Principle, r=rate as a decimal, t+ time in years.
(assuming simple interest)
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
Note that % is a bit like units of measurement but one that is worth
dropping the $ sign for now.
but 5000 is the same as
Now we put the $ back in giving
But this is for 1 year.
So 3 years is #3xx$350 = $1050