Chapter 7, Problem 4CR

To determine

To calculate: The principal, interest earned and balance.

Answer to Problem 4CR

The value of principal, interest earned and balance are as follows:

  $\begin{array}{l}P=\$500\\ I=\$10\\ A=\$510\end{array}$

Explanation of Solution

Given information:

An account is opened with $\$500$ . After 1 year, the account has $\$510$ .

Calculation:

To identify the principal, interest earned and balance, look at the given information. Since, the account is opened with $\$500$ , therefore, principal( $P$ ) = $\$500$ . After 1 year, the account has $\$510$ , therefore, balance( $A$ ) = $\$510$ . Since balance is the sum of principal and interest( $I$ ), interest will be calculated as:

  $\begin{array}{l}A=P+I\text{ [Formula]}\\ \Rightarrow 510=500+I\text{ [Substitute the values of P and A]}\\ \Rightarrow 510-500=500-500+I\text{ [Subtract 500 from both sides]}\\ \Rightarrow I=\$10\end{array}$