10 years ago, John opened a savings account with the Citizens Bank by depositing

Question

10 years ago, John opened a savings account with the Citizens Bank by depositing $10,000. The account pays 5% simple interest. 5 years after his first deposit, he made another deposit of $5,000. What will be the total amount in the account 5 years from now? 10 years ago, John opened a savings account with the Citizens Bank by depositing $10,000. The account pays 5% simple interest. 5 years after his first deposit, he made another deposit of $5,000. What will be the total amount in the account 5 years from now? 10 years ago, John opened a savings account with the Citizens Bank by depositing $10,000. The account pays 5% simple interest. 5 years after his first deposit, he made another deposit of $5,000. What will be the total amount in the account 5 years from now?

Explanation / Answer

Total amount in the account 5 years from now $ 25,000

Working:

There are two investments made -Deposit of $ 10,000 and $ 5,000. Life of Investments of $ 10,000 is 15 years(10 years ago to 5 years from now) and $ 5,000 is 10 years(5 years ago to 5 years from now) Interest earned on first deposit = Deposit x Simple interest rate x life in years = $       10,000 x 5% x 15 = $         7,500 Interest earned on second deposit = Deposit x Simple interest rate x life in years = $         5,000 x 5% x 10 = $         2,500 Total Amount in account 5 years from now is calculated as follows: First deposit $       10,000 Second Deposit $         5,000 Interest earned on first deposit $         7,500 Interest earned on second deposit $         2,500 Total amount in the account $       25,000

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