Danny deposits $12,500 into a pension fund that invests in stocks. After a successful two years of investing in the stock market, the fund agrees to pay a simple interest rate of 12% per year. What will the balance on the account be after two years earning interest at this rate? Round your answer to the nearest dollar.

Question

Sarge

Mathematics

20 January, 06:34

Danny deposits $12,500 into a pension fund that invests in stocks. After a successful two years of investing in the stock market, the fund agrees to pay a simple interest rate of 12% per year. What will the balance on the account be after two years earning interest at this rate? Round your answer to the nearest dollar.

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Answers (1)

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Jaydan Delgado · Answer 1

Answer: while earning interest at this rate, the total balance that will be found in the account will be $15,500

Step-by-step explanation:

Before calculating the amount that the sum will grow to after two years, we need to input the formula for calculating simple interest since what the pension fund agreed to pay is a simple if interest if 12%.

Simple interest (S. I) = [Principal (P) * Rate (R) * Time (T) ]/100

In this case, the amount deposited initially us $12,500, this is therefore the principal (P). The pension fund agreed to pay a simple interest of 12%, this is then the rate (R). The investment is for a period of two years, this is the time, (t).

S. I = (12,500 * 12 * 2) / 100

= $3,000

This is the total interest the deposit will yield. We then add this interest to the initial deposit of $12,500 to find the total amount that will now be in the account after the two years.

$12,500 + $3,000

= $15,500

The total balance in the account after the period of two years is $15,500