(full: Samantha invested $500 in a savings account. The interest rate is 2% per year. Find the simple interest earned in 3 years. Then find the total of principal plus interest.)
Lopa gave you compound interest, with interest compounded yearly. Even though that was not your question, it is a little interesting to see the difference between simple interest and compound interest.
I = PRT
= 500 x .02 x 3
= $30
P + I = 500 + 30 = $530
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You do:
$500 x 1.02^3
=$530.60400
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Formula: Interest = PRT/100 whereby, P is principal, R is rate and T is time(years).
Input the given data into formula, (500)(2)(3)/100 = $30
The total = $500 + 30 = $530
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Lopa gave you compound interest, with interest compounded yearly. Even though that was not your question, it is a little interesting to see the difference between simple interest and compound interest.
References :
Simple interest;
$500 * 0.02 * 3 = $30 in interest.
But if it’s compounded.
x = $500 * 0.02 = $10 ………… year 1
$510 * 0.02 = $10.20 …………. year 2
$520.20 * 0.02 = $10.404 ……. year 3
Total for three years is $30.604
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