Question

Kayla has $10 in a savings account. The interest rate is 5% per year and is not compounded. How much will she have in 2 years? Use formula i=p*r*t, where i is the interest earned, p is the principal (starting amount), r is the interest rate expressed as a decimal, and t is the time in years

Answer 1

This is a question of Simple Interest. The simple interest is given by the formula:

$I=P\cdot R\cdot T$

That is:

Interest = Principal * Rate * Time

From the question, we have:

P = $10

R = 5% ---> 5/100 = 0.05

T = 2 years

Then, we have that the interest is (without units):

$I=10\cdot0.05\cdot2\Rightarrow I=1$

Therefore, the interest is $1.

However, Kayla will have in two years this interest plus the starting amount, that is:

$10 + $1 = $11.

Hence, Kayla will have $11 in two years in her savings account.