SIMPLE INTEREST

Question

kelsie has an $800 savings bond which she has had for 2 1/2 years. The bond pays simple interest at the rate of 3.8% per year. If kelsie cashes the bond, what amount will she receive?

Answer 1

800 * 1.038^2.5
= 800 * 1.0977
= 878.16

Answer 2

Oops. That was compound interest.

Simple interest pays .038*800 = 30.40 each year

SO, after 2.5 years, she has earned 2.5*30.40 = 76.00 in interest.