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Dean placed $4500 in a savings account which compounds interest annually at a rate of 2.2%. What is the interest after 1 year?

1) 99
2) 99.001
3) 99.01
4) 99.1

Answer :

Final answer:

The interest accrued on $4500 deposited in a savings account at an annual interest rate of 2.2% compounded annually over a period of one year is $99.

Explanation:

The interest accrued after 1 year on Dean's savings can be calculated using the compound interest formula. In this case, the interest is compounded annually, which means this is a simple interest calculation problem with only one compounding period, i.e., one year. For this calculation, we will express the interest rate of 2.2% as a decimal, which is 0.022.

Here is the formula for calculating the interest amount: I=P*R*T where I is interest, P is Principal sum (amount of money placed in the savings account), R is annual Rate of interest in decimal form, and T is Time period in years.

In Dean's case, P=$4500, R=0.022, and T=1 year.

So, substitute these values into the formula: I = 4500 * 0.022 * 1 = 99. So, the interest that Dean earned after 1 year is $99. Therefore, the correct answer to your question is 1) 99.

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