Danny deposits $12,500 into a pension fund that invests in stocks. After a successful two years of investing in the stock market, the fund agrees to pay a simple interest rate of 12% per year. What will the balance on the account be after two years of earning interest at this rate?

We have been given that Danny deposits $12,500 into a pension fund that invests in stocks. After a successful two years of investing in the stock market, the fund agrees to pay a simple interest rate of 12% per year.

We will use simple interest formula to solve our given problem.

[tex]A=P(1+rt)[/tex], where,

A = Amount after t years,

P = Principal amount,

r = Annual interest rate in decimal form,

t = Time in years.

[tex]12\%=\frac{12}{100}=0.12[/tex]

Upon substituting our given values in above formula, we will get:

[tex]A=\$12,500(1+0.12\cdot 2)[/tex]

[tex]A=\$12,500(1+0.24)[/tex]

[tex]A=\$12,500(1.24)[/tex]

[tex]A=\$15,500[/tex]

Therefore, the balance on the account be after two years of earning interest at 12% would be $15,500.