Question

Zachary invests $400 into an account that earns 3.5% simple interest for 5 years. He does not make any other deposits or withdrawals.

At the end of 5 years, Zachary invests the entire account balance into a different account that earns 5% simple interest. He leaves the money in the account for 2 years without making any additional deposits or withdrawals.

What is the new account balance at the end of 2 years?

Answer 1

The new account balance at the end of 2 years is $517.

Simple interest

5 yearsUsing this formula I= (P+r×t)

Where: I=Interest=?

P=Principal=$400

r=Interest rate=3.5%

t=Time=5 years

Hence: I= ($400×0.035 x 5) which makes I= $70

2 years

I=Interest=?

P=Principal=$470

r=Interest rate=5%

t=Time=2 years

I=($470+0.05×2) which makes I=$47

New balance:

New balance=$400+$70+$47

New balance=$517

Inconclusion the new account balance at the end of 2 years is $517.