Suppose someone invests $2,500 in a bank account with a given rate of interest while satisfying the conditions given above, the final amount at the end of the given period will be $5,500.
Interest can be referred to or considered as the amount received as a part of deposits kept with a financial institution for a given period of time. The interest rate is fixed at the time of deposit being made.
The calculation of amount received from given interest rate and other information will be,
Amount = Principal (1 + interest rate x time)
Amount = 2500 (1 + 1.2)
Amount = $5,500
Therefore, the significance regarding interest rate has been aforementioned.
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