Suppose your friend's parents invest $20,000 in an account paying 4% compounded annually. What will the balance be after 6 years?

You want to calculate the interest on $20000 at 4% interest per year after 6 year (s). The formula we'll use for this is the simple interest formula, or: Where:

P is the principal amount, $20000.00.

r is the interest rate, 4% per year, or in decimal form, 4/100=0.04.

t is the time involved, 6 ... year (s) time periods.

So, t is 6 ... year time periods.

To find the simple interest, we multiply 20000 * 0.04 * 6 to get that: The interest is: $4800.00