Maybe that was to confusing...we have a data sheet to fill out - 2 questions with simple interest and 2 with compound interest.
I just need the simple interest help:
Prob. #1 Find the total amount if you deposit $500. at a rate of 5% for two years using simple interest.
Year 1 - $500.00 x .05% = $25.00 = $525.00
Year 2 the teacher said I had to start with $500. again - I don't understand what my total will be?? Please help
To calculate the total amount after two years using simple interest, you will start with $500 in both years and apply the interest rate of 5% each year. Here's how you can calculate it step-by-step:
Step 1: Calculate interest for Year 1:
Interest = Principal x Rate
Interest for Year 1 = $500 x 0.05 = $25
Step 2: Add the interest to the principal for Year 1:
Total amount after Year 1 = Principal + Interest
Total amount after Year 1 = $500 + $25 = $525
Step 3: Calculate the interest for Year 2:
Since your teacher said you need to start with $500 again in Year 2, the principal remains the same as Year 1, which is $500.
Interest for Year 2 = $500 x 0.05 = $25
Step 4: Add the interest to the principal for Year 2:
Total amount after Year 2 = Principal + Interest
Total amount after Year 2 = $500 + $25 = $525
Therefore, the total amount after two years using simple interest will be $525.
To calculate the total amount with simple interest, you need to apply the simple interest formula:
Simple Interest = Principal (P) x Interest Rate (R) x Time (T)
In this case:
Principal (P) = $500
Interest Rate (R) = 5% or 0.05 (decimal form)
Time (T) = 2 years
For Year 1, you've correctly calculated the interest as $25, which is 5% of $500. So, you add this interest to the principal for Year 1:
Year 1 Total = Principal for Year 1 + Interest for Year 1
= $500 + $25
= $525
Now, for Year 2, you start again with the principal amount of $500. You need to calculate the interest for Year 2 separately and add it to the principal.
Interest for Year 2 = Principal for Year 2 x Interest Rate x Time
= $500 x 0.05 x 1 (since it's just 1 year)
= $25
Total for Year 2 = Principal for Year 2 + Interest for Year 2
= $500 + $25
= $525
Now, to find the overall total after two years, you need to add the Year 1 total and the Year 2 total:
Total Amount = Year 1 Total + Year 2 Total
= $525 + $525
= $1050
Therefore, the total amount after two years, using simple interest, will be $1050.