document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=130158>Question 130158</A>: <I><SPAN STYLE=\"word-break: break-all;\"> Hi,<BR>\n" );
document.write( "Not sure if this is correct, but is the answer 52,000? I am thinking that the problem should be set up as follows:<BR>\n" );
document.write( "650,000 x 4% for two years...therefore 650,000x8%????  <BR>\n" );
document.write( "Question:<BR>\n" );
document.write( "If 650,000 is invested in an account paying simple annual interest, how much interest will be earned in two years at the annual rate of 4%? </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #95084 by </B><A HREF=/tutors/aboutme.mpl?userid=bucky><B>bucky(2189)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=bucky><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/images/nopicture.jpg><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=95084\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> You make a little more than that.<BR>\n" );
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document.write( "You can look at the problem in two stages. The first year you have $650,000 invested at<BR>\n" );
document.write( "a simple interest rate of 4% (or 0.04) which, because simple interest is used, is paid at the <BR>\n" );
document.write( "end of the year. At the end of the first year you have your principal plus 4% of the principal.<BR>\n" );
document.write( "So you actually have 1.04 of your principal at the end of the year. This can be calculated as:<BR>\n" );
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document.write( "($650,000)*(1.04) = $676,000<BR>\n" );
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document.write( "Therefore, during the second year, you will have $676,000 invested at 4%. So similarly to<BR>\n" );
document.write( "the first year you can multiply the principal times 1.04 to find your worth at the end of the<BR>\n" );
document.write( "second year. So for the second year you find your worth by multiplying $676,000 by 1.04 and<BR>\n" );
document.write( "you get:<BR>\n" );
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document.write( "($676,000)*(1.04) = $703,040<BR>\n" );
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document.write( "Then you find the interest you made during the two years by subtracting your original<BR>\n" );
document.write( "investment from your worth at the end of the second year to find that your total interest <BR>\n" );
document.write( "for the two-year period is:<BR>\n" );
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document.write( "$703,040 - $650,000 = $53,040<BR>\n" );
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document.write( "Another way you can look at this is that at the end of the first year your investment is<BR>\n" );
document.write( "worth:<BR>\n" );
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document.write( "($650,000)*(1.04)<BR>\n" );
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document.write( "Then to find your worth at the end of the second year, you multiply what you have at the<BR>\n" );
document.write( "end of the first year by 1.04. This means that at the end of the second year you have:<BR>\n" );
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document.write( "(($650,000)*(1.04))*(1.04)<BR>\n" );
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document.write( "This can be simplified to:<BR>\n" );
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document.write( "($650,000)*(1.04)^2<BR>\n" );
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document.write( "With a little more thought you can extend this into a formula for simple interest. Let<BR>\n" );
document.write( "\"P\" represent your initial investment (the principal), \"I\" represent the annual interest rate as<BR>\n" );
document.write( "a decimal, and \"N\" represent the number of years the principal and the interest are left to<BR>\n" );
document.write( "accumulate. At the end of N years your account will contain an amount A as follows:<BR>\n" );
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document.write( "A = P*(1 + I)^N<BR>\n" );
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document.write( "Just subtract P (original investment) from A (amount after N years) and you will have the interest<BR>\n" );
document.write( "that you have made during the N years.<BR>\n" );
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document.write( "Hope this helps you to understand the problem.<BR>\n" );
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document.write( " </SPAN>\n" );
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