After 5 years, how much INTEREST will Kevin earn in interest from his savings account?
Given the fact:
Kevin deposits $175 each year on his birthday for 5 year into his savings account.
His account earns simple interest at a rate of 3.5% interest.
A.) $91.89 ****
B.) $30.65
C.) $61.25
D.) $18.38
175 * 0.035 = 6.13 int. yr 1
175 + 175 = 350 * 0.035 = 12.25 int. yr 2
350 + 175 = 525 * 0.035 = 18.38 int. yr 3
525 + 175 = 700 * 0.035 = 24.50 int. yr 4
700 + 175 = 875 * 0.035 = 30.63 int. yr 5
=$91.89
I=PRT
But NOT I=175 * 0.035 * 5 = $30.65 ???
175 * 0.035 = 6.13 int. yr 1 so now 181.13
181.13 + 175 = 356.13 * 0.035 = 12.46 int. yr 2
etc, remember principal has increased each year
To calculate the total interest earned by Kevin over 5 years on his savings account, you need to follow these steps:
1. For each year, calculate the interest earned on the annual deposit:
- Year 1: $175 * 0.035 = $6.13
- Year 2: ($175 + $175) * 0.035 = $12.25
- Year 3: ($175 + $175 + $175) * 0.035 = $18.38
- Year 4: ($175 + $175 + $175 + $175) * 0.035 = $24.50
- Year 5: ($175 + $175 + $175 + $175 + $175) * 0.035 = $30.63
2. Add up all the yearly interest amounts:
$6.13 + $12.25 + $18.38 + $24.50 + $30.63 = $91.89
Therefore, Kevin will earn $91.89 in interest from his savings account after 5 years. So, the correct answer is option A) $91.89, not option B) $30.65.