INTEREST You deposit $1200 in an account at a bank that pays 5.25% annual simple interest.After 4 months, the interest rate on your account increases to 5.65% annual simple interest.After 1 year from the original deposit, how much additional money have you earned from the increase in the interest rate? Please tell me how to solve this and what the correct answer is
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The additional interest is generated by the 0.4% difference (from 5.25% to 5.65%) for eight months or 8/12 or 2/3 of the year.
Convert the percent difference to its decimal equivalent and multiply:
$1200 * 0.004 * 2/3 = $3.20
Convert the percent difference to its decimal equivalent and multiply:
$1200 * 0.004 * 2/3 = $3.20
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convert 5.25% to a decimal by dividing by 100
5.25/100= 0.00525
multiply
$1200, 5.25%, and 4 months
1200*0.00525*4
=$25.20
Add to initial deposit
$1225.20
It increases to 5.65% after 4 months and 1 year = 12 months, so the interest has been 5.65% for 8 months.
Turn 5.65% into decimal form
Multiply $1225.20 , 5.65% and 8 months
1225.20*0.00565*8
=$55.38
5.25/100= 0.00525
multiply
$1200, 5.25%, and 4 months
1200*0.00525*4
=$25.20
Add to initial deposit
$1225.20
It increases to 5.65% after 4 months and 1 year = 12 months, so the interest has been 5.65% for 8 months.
Turn 5.65% into decimal form
Multiply $1225.20 , 5.65% and 8 months
1225.20*0.00565*8
=$55.38