Answer: while earning interest at this rate, the total balance that will be found in the account will be $15,500
Step-by-step explanation:
Before calculating the amount that the sum will grow to after two years, we need to input the formula for calculating simple interest since what the pension fund agreed to pay is a simple if interest if 12%.
Simple interest (S.I) = [Principal(P) × Rate(R) × Time(T)]/100
In this case, the amount deposited initially us $12,500, this is therefore the principal (P). The pension fund agreed to pay a simple interest of 12%, this is then the rate(R). The investment is for a period of two years, this is the time, (t).
S.I = (12,500 × 12 × 2)/100
= $3,000
This is the total interest the deposit will yield. We then add this interest to the initial deposit of $12,500 to find the total amount that will now be in the account after the two years.
$12,500 + $3,000
= $15,500
The total balance in the account after the period of two years is $15,500
