Video: Solving Word Problems Involving Percentages and Simple Interest

Benjamin had $820,000. He paid $250,000 in taxes and invested the rest in a savings account with a 4.95% simple interest. Determine the amount of money in Benjamin’s account if he makes no deposits or withdrawals for two years.

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Video Transcript

Benjamin had 820,000 dollars. He paid 250,000 dollars in taxes and invested the rest in a savings account with a 4.95 percent simple interest. Determine the amount of money in Benjamin’s account if he makes no deposits or withdrawals for two years.

We can calculate the amount of simple interest accrued using the formula 𝐼 equals 𝑃 multiplied by 𝑅 multiplied by 𝑇. 𝐼 is the amount of interest that is accrued. 𝑃 is the principal amount, in this case, the amount that was invested. 𝑅 is the rate of interest written as a decimal. And finally, 𝑇 is the time period. In this question, the amount invested can be calculated by subtracting the amount of tax, 250,000, from 820,000. This is equal to 570,000. Therefore, Benjamin invested 570,000 dollars.

The rate of interest was 4.95 percent. We can convert this to a decimal by dividing by 100. This is equal to 0.0495. As we want to calculate the amount of money after two years, 𝑇 is equal to two. We can, therefore, calculate the amount of simple interest by multiplying 570,000, 0.0495, and two. Typing this into the calculator gives us 56430. The amount of interest that Benjamin accrued was 56,430 dollars. As we need to calculate the new amount of money in Benjamin’s account, we need to add this interest to 570,000, the amount he initially invested. 570,000 plus 56,430 is equal to 626,430. We can, therefore, conclude that, after two years, Benjamin has 626,430 dollars.

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