A bank offers an interest rate of 5% per annum. If a customer deposits $1,000, h
Practice Questions
Q1
A bank offers an interest rate of 5% per annum. If a customer deposits $1,000, how much interest will the customer earn in 3 years? (2023)
$150
$100
$50
$200
Questions & Step-by-Step Solutions
A bank offers an interest rate of 5% per annum. If a customer deposits $1,000, how much interest will the customer earn in 3 years? (2023)
Step 1: Identify the principal amount, which is the initial deposit. In this case, it is $1,000.
Step 2: Identify the interest rate. The bank offers an interest rate of 5% per annum, which can be written as 0.05 in decimal form.
Step 3: Identify the time period for which the money is deposited. Here, the time is 3 years.
Step 4: Use the formula for calculating interest: Interest = Principal * Rate * Time.
Step 5: Substitute the values into the formula: Interest = $1,000 * 0.05 * 3.
Step 6: Calculate the interest: $1,000 * 0.05 = $50, then $50 * 3 = $150.
Step 7: The total interest earned after 3 years is $150.
Simple Interest Calculation – The formula for calculating simple interest is Interest = Principal * Rate * Time, where Principal is the initial amount deposited, Rate is the annual interest rate, and Time is the duration in years.
