Find the total amount if you deposit $500 at a rate of 5% for two years using simple interest.
For year one
For year two
I started with $500. for year one
and $525. for year two and added the interest and ended up with 551.25 - and I was wrong...can someone please help
To calculate simple interest, you can use the following formula:
Simple Interest = Principal * Rate * Time
Given that the principal (P) is $500, the interest rate (R) is 5%, and the time (T) is 2 years, we can substitute these values into the formula:
Simple Interest = $500 * 0.05 * 2
Simple Interest = $50
Therefore, the total amount after two years would be the sum of the principal and the simple interest:
Total Amount = Principal + Simple Interest
Total Amount = $500 + $50
Total Amount = $550
To calculate the total amount using simple interest, you can use the formula:
Total amount = Principal + (Principal * Interest Rate * Time)
In your case:
Principal (P) = $500
Interest Rate (R) = 5% = 0.05 (in decimal form)
Time (T) = 2 years
For year one:
Total amount = $500 + ($500 * 0.05 * 1) = $500 + $25 = $525
For year two:
Total amount = $525 + ($525 * 0.05 * 1) = $525 + $26.25 = $551.25
So, the correct total amount after two years would be $551.25. It seems like you made a calculation error when adding the interest for the second year.