Tony deposited $3000 into a savings account that pays him interest at a rate of 3%. How much interest will Tony earn in 5 years?
I = PRT
I = 3000 * 0.03 * 5
To find out how much interest Tony will earn in 5 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the final amount (including interest)
P = the principal amount (the initial deposit)
r = the annual interest rate (expressed as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case, we have:
P = $3000 (the initial deposit)
r = 3% = 0.03 (the annual interest rate expressed as a decimal)
n = 1 (interest is compounded annually)
t = 5 (the number of years)
Plugging these values into the formula, we get:
A = 3000(1 + 0.03/1)^(1*5)
A = 3000(1 + 0.03)^5
A = 3000 * 1.03^5
Using a calculator or a math software, we can calculate A:
A ≈ $3459.27
To find out how much interest Tony will earn, we subtract the initial deposit from the final amount:
Interest = A - P
Interest = $3459.27 - $3000
Therefore, Tony will earn approximately $459.27 in interest over 5 years.