Figuring Simple Interest for 6 Years?

Question

Hi - For hmwk, I need to find the simple interest I will get for an untouched account for 6 years. Interest is 5%.

I will use a beginning balance of $100 to make it easy. So, if the simple interest is 5%, that will be $5 every month.

Now, do I just add $5 for every month for 6 years? Or...do I need to start w/ a new balance every time the year changes, and figure out what %5 of that new balance is every year?

Thanks!

Answer 1

Since you said simple interest, there is no compounding. If you start with a new balance every year that includes your earned interest, then you are compounding.

As you thought, just add $5 for every month for 6 years.
.

Answer 2

simple interest is paid annually. Think about it. $5 every month would be $60 interest on a $100 placed in a bank for one year. $60 is 60% of $100, so you are not right. It is $5 for the first year added to the $100 = $105. 2nd year it is 5% of $105 added to $105 = get it?