The Correct Answer and Explanation is:
Correct Answer: $12,000
Explanation:
To determine the total amount in Jennifer’s savings account after 10 years, we need to calculate the simple interest earned and add it to the initial principal deposit. The problem provides all the necessary information: the principal amount, the annual interest rate, and the time period. The formula for calculating simple interest is a fundamental concept in finance.
First, we identify the given values. The principal (P), which is the initial amount Jennifer plans to deposit, is $10,000. The annual interest rate (R) is 2%, which must be converted to a decimal for calculation purposes, becoming 0.02. The time (T) for which the money will be in the account is 10 years.
The formula to find the simple interest (I) earned is I = P × R × T. By substituting the values into this formula, we can calculate the total interest. The calculation is as follows: Interest = $10,000 × 0.02 × 10. This shows that Jennifer earns
200ininteresteachyear(200ininteresteachyear(10,000 × 0.02). Over the full ten year period, the total interest accrued will be $200 multiplied by 10, which equals $2,000.
Finally, to find the total amount in the account, we must add the total interest earned to the original principal amount. The formula for the total amount (A) is A = Principal + Interest. So, the total amount is $10,000 + $2,000. This results in a final balance of $12,000. Therefore, after 10 years, Jennifer’s savings account will contain a total of $12,000. The fact that there are three different banks is irrelevant to the calculation since they all offer the same 2% simple interest rate.
