Danny invested$5,000 into his savings account for college when he was 13 years old. If the account earns 2.5% interest every year, how much interest will danny have earned on his investment and how much money will danny have for college by the time that he is 18 years old?
To calculate the interest earned and the total amount of money Danny will have by the time he is 18 years old, we first need to find the interest earned each year and then add it to the initial investment.
The formula to calculate the interest earned is simple interest: I = P * R * T, where:
- I represents the interest earned,
- P represents the principal amount (initial investment),
- R represents the interest rate,
- T represents the time period (in years).
Let's calculate the interest earned:
I = $5,000 * 0.025 * 5
I = $625
Therefore, Danny will have earned $625 in interest on his investment by the time he is 18 years old.
Now, let's calculate the total amount of money Danny will have for college:
Total amount = Principal + Interest
Total amount = $5,000 + $625
Total amount = $5,625
Therefore, by the time he is 18 years old, Danny will have $5,625 for college.