to be able to take her dream vacation, amy decides to save for 5 years. she opens a savings account with…

to be able to take her dream vacation, amy decides to save for 5 years. she opens a savings account with $500. the account pays simple interest at an annual rate of 5%. she doesnt make any more deposits. answer the following questions. if necessary, refer to the list of financial formulas. (a) how much total interest will amy earn? (b) what will the total amount in the account be (including interest)?

to be able to take her dream vacation, amy decides to save for 5 years. she opens a savings account with $500. the account pays simple interest at an annual rate of 5%. she doesnt make any more deposits. answer the following questions. if necessary, refer to the list of financial formulas. (a) how much total interest will amy earn? (b) what will the total amount in the account be (including interest)?

Answer

Explanation:

Step1: Identify the simple - interest formula

The simple - interest formula is $I = Prt$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the time in years. Given $P=$500$, $r = 0.05$ (since $5%=0.05$), and $t = 5$ years.

Step2: Calculate the total interest

Substitute the values into the formula: $I=Prt=500\times0.05\times5$. $I = 500\times0.25=$125$.

Step3: Calculate the total amount in the account

The total amount $A$ in the account is the sum of the principal $P$ and the interest $I$. So $A=P + I$. Since $P = 500$ and $I = 125$, then $A=500 + 125=$625$.

Answer:

(a) $125 (b) $625