Question

Olivia deposites $650 in a bank that pays 1 3/8 % annual interest. How much interest does she earn in 5 years? What is the total amount of money Olivia will have in her bank account in 5 years?

Answer 1

convert the interest rate to a decimal form by divindig into 100

$(1\frac{3}{8})percent=\frac{11}{800}=0.01375$

since it is paying anually we can use the simple interest formula

$I=P\cdot r\cdot t$

replace in the formula

$\begin{gathered} I=650\cdot0.01375\cdot5 \\ I=44.6875 \end{gathered}$

The interest that she will earn will be approximately $44.69

To find how much money will Olivia have in 5 years, add the principal with the interest.

$\begin{gathered} A=P+I \\ A=650+44.69 \\ A=694.69 \end{gathered}$

She will have in her bank account after 5 years $694.69