Solve each problem. If a person invests $500 at 2% simple interes...

Question

Solve each problem. If a person invests $500 at 2% simple interest for 4 yr, how much interest is earned?

Accepted Answer

Welcome back. I am so glad you're here. We are asked to calculate the interest. So we're looking for the interest or I that Cocoa earns if he lets Momo borrow $1122. Well, that's the principle, that's the amount being borrowed. So that's 1122 at a simple interest of 1.35% per month. Okay. So we have a rate of 1.3, per month payable over a period of eight months. Okay. So the time is equal to eight months and we need to find the interest. Well, we recall from previous lessons that we have a formula for this, we have interest equals principle times rate, times time. And one thing we always need to know when we're using this formula is that the rate and the time need to be in the same format for time and they are here, they're both months. So when we're multiplying those together, the months are going to cancel out, which is perfect. The only other thing we need to note is that for our rate, we want to convert that to a decimal. So 1.35% equals 0.135. And now we can just plug everything in. So we have our interest equals our principle. The principle is 1122 times the rate in a decimal. That's 0.135 times the time and the time is eight months. Now just plugging all that into a calculator times 0.135 times eight equals 121.1. And it rounds to 18. So that's how much interest coco earned $121.18. We look at our answer choices and this matches with answer choice. D. Well done. We'll catch you on the next one.

Solve each problem. If a person invests $500 at 2% simple interest for 4 yr, how much interest is earned?

Key Concepts

Simple Interest Formula

Principal Amount

Interest Rate

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