SOLUTION: A worker deposits the proceeds from a bonus in an account that earns an annual simple interest rate of 5%. The worker leaves the money in the account for 10 years without adding

Question 1132773: A worker deposits the proceeds from a bonus in
an account that earns an annual simple interest
rate of 5%. The worker leaves the money in the
account for 10 years without adding or withdrawing
money. Is the amount of interest earned in the eighth
year less than, equal to, or more than the amount of
interest earned in the fourth year
Found 2 solutions by greenestamps, MathTherapy:
Answer by greenestamps(13198) (Show Source): You can put this solution on YOUR website!

With simple interest, the amount of interest is always based on the original amount. So the amount of interest in each year is going to be the same.

ANSWER: The amount of interest in the 8th year is equal to the amount of interest in the 4th year.

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Added after seeing the response by tutor @MathTherapy....

He apparently thinks he knows everything, because all his responses say "accept no other answer". Unfortunately, his answers are not always right.

Ignore his answer on this one; it is plain wrong.

The situation he describes, where interest for a year is based on the total amount at the beginning of the year, is precisely what describes compound interest -- NOT simple interest.

With compound interest, the amount of interest in each year is more than the interest in the preceding year.

But your problem involves SIMPLE interest.

The formula for the amount of simple interest is

I = prt

I = interest amount
p = initial amount
r = interest rate
t = time (years)

Let's look at a simple example -- $1000 with an interest rate of 10%.

The interest earned in 3 years is I = prt = ($1000)(.10)(3) = $300

The interest earned in 4 years is I = prt = ($1000)(.10)(4) = $400

The interest earned IN THE 4TH YEAR is $400-$300 = $100.

The interest earned in 7 years is I = prt = ($1000)(.10)(7) = $700

The interest earned in 8 years is I = prt = ($1000)(.10)(8) = $800

The interest earned IN THE 4TH YEAR is $800-$700 = $100.

The interest earned in the 8th year is THE SAME AS the interest earned in the 4th year.
Answer by MathTherapy(10551) (Show Source): You can put this solution on YOUR website!

A worker deposits the proceeds from a bonus in an account that earns an annual simple interest rate of 5%. The worker leaves the money in the account for 10 years without adding or withdrawing money. Is the amount of interest earned in the eighth year less than, equal to, or more than the amount of interest earned in the fourth year

Correct answer: The amount of interest in the 8th year will be more than the amount of interest in the 4th year.
Although it's simple interest, each year after the initial deposit interest will cause the original amount to INCREASE, thereby leading to a DIFFERENT amount
each year after the 1st year. As a matter of fact, interest at the end of year 2 will be more than interest at the end of year 1, and interest at the end of
year 3 will be more than interest at the end of year 2, and so on.
ACCEPT no other answer!
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