Question

Jane deposits $1,000 into her savings account. During the first year, the account pays 6% but then the interest rate is cut to 4% for the second year. How much does Jane in her account have after two years?

Answer 1

Answer:

Formula-

Amount = Principal * (1+rate of interest)^{number of years}

Amount as per 6% interest rate in first year:

Amount = 1000 * (1+.06)¹

Amount = $1060

Interest = $60

Amount as per 4% interest rate in second year:

Amount = 1000 * (1+.04)

Interest = $40

Total amount after two years = $60 + $1040

= $1100

Note: Considering a simple interest