Tim deposited $2,500 into an account. He made no additional deposits or withdrawals. Tim earned 5.25% annual simple interest on the money in the account. What was the balance in dollars and cents in Tim’s account at the end of 5 years?

Question

Tim deposited $2,500 into an account. He made no additional deposits or withdrawals. Tim earned 5.25% annual simple interest on the money in the account. What was the balance in dollars and cents in Tim’s account at the end of 5 years?

A $3,156.25$3,156.25

B $131.25$131.25

C $656.25$656.25

D $6,562.50$6,562.50

Answer 1

The formula for simple interest is:

Interest = Principal x Rate x Time

In this case, the principal is $2,500, the rate is 5.25% (or 0.0525), and the time is 5 years.

Interest = $2,500 x 0.0525 x 5 = $656.25

To find the balance, we add the interest to the principal:
Balance = Principal + Interest = $2,500 + $656.25 = $3,156.25

So the correct answer is A) $3,156.25.