If $100 is interested at 6% compounded: a-Annually
b-Monthly
What is the amount after 4 years? How much interest is earned?

To find the simple interest we'll plug it into one of the two available formulas. I will use both formulas so you can determine which is easiest for you, for future problems.

                                     r = I/Pt         or     I = Prt

                                     (the / represents division)

Let's define and plug.

r = the rate (we'll be solving for r)

I = the total interest earned within the time frame ($2)

P= the principal amount ($100)

t = the total time the principal accrued interest. (6 months/ .5years)

**Because this is in a monthly basis, lets change it into a year to make it easier**

we'll just divide 6 months by 12 months.

6 ÷ 12 = 0.5 years

Let's use the first formula first. r = I / Pt

r = 2 / 100 (0.5)

100 x 0.5 = 50

We're now left with:            r = 2 / 50

Divide what we have left.

2 ÷ 50 = 0.04

This is our simple interest but we have to convert it into a percentage. To convert the decimal to the percentage, we'll move the decimal two places to the right to  make 4.0.

Therefore, our simple interest would be 4%

let's set up the second formula:  I = Prt

2 = 100 (r) (0.5)

2 = 50 (r)

2 ÷ 50 = 0.04

0.04 in percentage = 4%

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