Question:
A teacher deposited $3,000 in a retirement fund. If she didn’t add any more money to the fund, which earns an annual interest rate of 6%, how much money would she have in 1 year?
A
$3,180
Explaination
To determine the amount of interest earned, multiply the principal ($3,000) by the interest rate (6%) and the number of years interest accrues (1 year): $3,000 × 0.06 × 1 = $180. Add the interest earned to the principal to show how much total money the teacher would have: $180 + $3,000 = $3,180.