Question

to be able to take her dream vacation, tammy decides to save for 4 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 tammy earn? $ (b) what will the total amount in the account be (including interest)? $

Explanation:

Part (a)

Step1: Recall simple interest formula

The formula for simple interest is \( I = P \times r \times t \), where \( P \) is the principal amount, \( r \) is the annual interest rate (in decimal), and \( t \) is the time in years.

Step2: Identify values

Here, \( P = \$500 \), \( r = 5\% = 0.05 \) (converted to decimal), and \( t = 4 \) years.

Step3: Calculate interest

Substitute the values into the formula: \( I = 500 \times 0.05 \times 4 \)
First, calculate \( 500 \times 0.05 = 25 \), then \( 25 \times 4 = 100 \).

Step1: Recall total amount formula

The total amount \( A \) in a simple - interest account is the sum of the principal \( P \) and the interest \( I \), i.e., \( A=P + I \).

Step2: Substitute values

We know that \( P = 500 \) and from part (a), \( I = 100 \). So, \( A=500 + 100 \).

Step3: Calculate total amount

\( 500+100 = 600 \).

Answer:

\( 100 \)

Part (b)