If a bank offers 5% interest per annum, how much interest will be earned on a pr

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Question: If a bank offers 5% interest per annum, how much interest will be earned on a principal of $2000 in 2 years?

Options:

Correct Answer: 100

Solution:

Interest = Principal * Rate * Time = 2000 * (5/100) * 2 = $200.

If a bank offers 5% interest per annum, how much interest will be earned on a principal of $2000 in 2 years?

If a bank offers 5% interest per annum, how much interest will be earned on a principal of $2000 in 2 years?

Step 1: Identify the principal amount, which is $2000.
Step 2: Identify the interest rate, which is 5%.
Step 3: Identify the time period, which is 2 years.
Step 4: Convert the interest rate from a percentage to a decimal by dividing by 100. So, 5% becomes 0.05.
Step 5: Use the formula for calculating interest: Interest = Principal * Rate * Time.
Step 6: Substitute the values into the formula: Interest = 2000 * 0.05 * 2.
Step 7: Calculate the interest: 2000 * 0.05 = 100, then 100 * 2 = 200.
Step 8: The total interest earned in 2 years is $200.

Simple Interest Calculation – The formula for calculating simple interest is Interest = Principal * Rate * Time.