SOLUTION: Tony has P20000 in his savings account.if the rate of interest is 4 1/2 % a year .how much interest does his money earn

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Question 1061548: Tony has P20000 in his savings account.if the rate of interest is
4 1/2 % a year .how much interest does his money earn
Answer by math_helper(2461) About Me  (Show Source):
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The problem doesn't specify how long the money sits in the savings account. That is important.
Assuming interest is compounded (interest earned in prior years is treated like principal for future years)
After 1 year, he will have +P20000%281%2B0.045%29+=+P20900+ so his money earned +P900
After 2 years, he will have +P20000%281%2B0.045%29%5E2+=+P21840.50 so his money has earned +P1840.50

After n years, he will have +P20000%281%2B0.045%29%5En+ and his earned interest will be
+P20000%28%281%2B0.045%29%5En+-+1%29+
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For the simple interest case, he earns the same as year 1 above, but every single year.