Lester deposited $400 into a savings account earning 4.5% simple interest and 450 into an investment account earning 3.2% interest compound annually. What was the total interest he earned in 3 years for both accounts?
Lester deposited $400 into a savings account earning 4.5% simple interest and 450 into an investment account earning 3.2% interest compound annually. What was the total interest he earned in 3 years for both accounts?
A. 54.00
B. 44.60
C. 81.90
D. 98.60
400*0.045*3 + 450*(1.032^3 - 1)
To find the total interest earned in 3 years, we need to calculate the interest earned on each account individually and then add them together.
First, let's calculate the interest earned on the savings account. The formula to find simple interest is:
Interest = Principal * Rate * Time
Where:
Principal = $400 (initial deposit)
Rate = 4.5% (in decimal form, 4.5/100)
Time = 3 years
Substituting the values into the formula:
Interest = $400 * 0.045 * 3
Interest = $54 (rounded to the nearest dollar)
Therefore, Lester earned $54 in interest on the savings account over 3 years.
Next, let's calculate the interest earned on the investment account. The formula to find compound interest is:
Interest = Principal * (1 + Rate)^Time - Principal
Where:
Principal = $450 (initial deposit)
Rate = 3.2% (in decimal form, 3.2/100)
Time = 3 years
Substituting the values into the formula:
Interest = $450 * (1 + 0.032)^3 - $450
Using a calculator, we find:
Interest = $450 * (1.032)^3 - $450
Interest = $49.24 (rounded to the nearest cent)
Therefore, Lester earned $49.24 in interest on the investment account over 3 years.
Finally, to find the total interest earned for both accounts, we add the interest earned on each account:
Total Interest = $54 + $49.24
Total Interest = $103.24 (rounded to the nearest cent)
Therefore, Lester earned a total interest of $103.24 over 3 years on both accounts.