Question

Aldo deposits $7000 into an account that pays simple interest at an annual rate of 2%. He does not make any more deposits. He makes no withdrawals until the end of 4 years when he withdraws all the money. How much total interest will Aldo earn? What will the total amount in the account be (including interest)?

Answer 1

Answer: Total amount of interest: $577.03 ; Total amount on the account: $7,577.03

Explanation:

Year 1: $7,000 × 2% = $140

Year 2: $7,140 × 2% = $142.8

Year 3: $7,282.8 × 2% ≈ $145.66

Year 4: $7,428.46 × 2% ≈ $148.57

By the end of the fourth year, Aldo has earned a total interest of $577.03. There would be $7,577.03 in the account by the end of the fourth year.

Answer 2

He does not make any more deposits. He makes no withdrawals until the end of 2 years when he withdraws all the money.