Question

An account with a $250 balance accrues 2% annually. If no deposits or withdrawals are made, what will happen to the interest?

Answer 1

Explanation:

Let's treat this as simple interest: i = p*r*t.

Here the principal is $250 and the annual interest rate is 0.02.

Thus, as a function of time, i = $250*0.02*t.

For example, the amount of interest paid after one year would be

i = $250*0.02*1 = $5

Answer 2

D

Explanation:

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