A deposit of $7,912 is made into a new account that earns 5.75% simple interest. No additional deposits or withdrawals will be made for 2 years.

Which amount is closest to the balance in the account at the end of 2 years?

1 answer

To calculate the total balance in an account after earning simple interest, we use the formula:

\[ A = P(1 + rt) \]

where:

  • \( A \) is the total amount in the account after time \( t \),
  • \( P \) is the principal amount (initial deposit),
  • \( r \) is the rate of interest (as a decimal),
  • \( t \) is the time in years.

Given:

  • \( P = 7912 \)
  • \( r = 5.75% = 0.0575 \)
  • \( t = 2 \) years

Now plug the values into the formula:

\[ A = 7912 \left(1 + (0.0575 \times 2)\right) \]

Calculating the interest part:

\[ 0.0575 \times 2 = 0.115 \]

Adding this to 1:

\[ 1 + 0.115 = 1.115 \]

Now substitute back into the formula:

\[ A = 7912 \times 1.115 \]

Calculating this gives:

\[ A \approx 8817.58 \]

Rounding this to the nearest dollar, the balance in the account at the end of 2 years is approximately:

\[ \boxed{8818} \]