1. $1000 is deposited into an account paying 2.3% simple interest for 5 years. What is the future value and the total interest earned?
I = Prt = 1000*0.023*5 = $115.00 A = P + I = 1000 + 115 = $1,115.00
or
A = P(1 + rt) = 1000*(1 + 0.023*5) = $1,115.00 I = A - P = 1115 - 1000 = $115.00
2. A customer invested $250 for 5 years and got back $284. Find the annual simple interest rate (expressed as a percentage rounded to 3 decimal places).
I = A - P = 284 - 250 = $34.00 If I = Prt then r = I/(Pt) = 34/(250*5) = 0.0272 = 2.720%