What is the final balance of a bank account after two years if the starting balance is $1,000 at an annual rate of 5%, using simple interest? Assume no other money was withdrawn or deposited.
- $50
- $100
- $1,050
- $1,100
- $1,150
Answer(s): D
Explanation:
This problem can be solved by using the simple interest formula: interest = principal × rate × time. Remember to change the interest rate to a decimal before using it in the formula. I = (1,000) (0.05) (2) = $100. Since $100 was made in interest, the total in the bank account is $1,000 + $100 = $1,100.
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