Ben is to invest $13 000 for 3 years at 8% p.a with interest paid annually. Find the amount of interest earned by calculating the simple interest for each year separately.
I know how to solve this using the normal method, but i don't know how to do it by calculating the interest for each year separately . Thanks.
To calculate the interest earned by calculating the simple interest for each year separately, you first need to understand the formula for calculating simple interest:
Simple Interest = Principal × Interest Rate × Time
In this case, the principal amount (P) is $13,000, and the interest rate (R) is 8% per annum. The time (T) for 3 years can be broken down into annual periods: Year 1, Year 2, and Year 3.
Here's how you can calculate the interest for each year separately:
1. Year 1:
For the first year, the principal is $13,000, and the interest rate is 8%. Using the formula, you can calculate the interest earned for Year 1 as:
Interest Year 1 = $13,000 × 8% × 1 year
Interest Year 1 = $13,000 × 0.08 × 1
Interest Year 1 = $1,040
2. Year 2:
For the second year, you still have $13,000 as the principal amount. Again, the interest rate is 8%. Using the formula, you can calculate the interest earned for Year 2 as:
Interest Year 2 = $13,000 × 8% × 1 year
Interest Year 2 = $13,000 × 0.08 × 1
Interest Year 2 = $1,040
3. Year 3:
For the third year, the principal amount remains $13,000, and the interest rate is still 8%. Using the formula, you can calculate the interest earned for Year 3 as:
Interest Year 3 = $13,000 × 8% × 1 year
Interest Year 3 = $13,000 × 0.08 × 1
Interest Year 3 = $1,040
Now, to find the total interest earned, simply add up the interest earned for each year:
Total Interest = Interest Year 1 + Interest Year 2 + Interest Year 3
Total Interest = $1,040 + $1,040 + $1,040
Total Interest = $3,120
Therefore, the total amount of interest earned by calculating the simple interest for each year separately is $3,120.
the interest is the same for each year:
13000 * 0.08
clearly you need to review why the "normal" method works as it does.