Allison was left an inheritance from her Great Aunt on her 12th birthday. However, she is not able to touch it until she is 21 years old. She inherited $50,000 that was put into an account with 2% interest.
*HINT: how many years is the problem asking for 12th birthday to 21st birthday** 21-12?? is your years!
Part A) How much interest will Allison have earned when she turns 21 years old?
Part B) How much money will be in the account on her 21st birthday?
Part A) To calculate the interest earned, we first need to figure out how many years will have passed from Allison's 12th birthday to her 21st birthday. That is 21 - 12 = 9 years.
The formula to calculate the interest earned is: Interest = Principal x Rate x Time
Given:
Principal (initial amount) = $50,000
Rate = 2% or 0.02
Time = 9 years
Interest = $50,000 x 0.02 x 9
Interest = $9,000
Therefore, Allison will have earned $9,000 in interest by the time she turns 21 years old.
Part B) To calculate the total amount of money in the account on her 21st birthday, we need to add the interest earned to the initial principal amount.
Total amount = Principal + Interest
Total amount = $50,000 + $9,000
Total amount = $59,000
Therefore, on her 21st birthday, there will be $59,000 in the account.