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A bank offers an interest rate of 5% per annum. If a customer deposits $1,000, h

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Question: 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)

Options:

  1. $150
  2. $100
  3. $50
  4. $200

Correct Answer: $100

Exam Year: 2023

Solution: 

Interest = Principal * Rate * Time = $1,000 * 0.05 * 3 = $150.

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)
  1. $150
  2. $100
  3. $50
  4. $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.
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