A sum of $2500 is invested at a simple interest rate of 6% per annum. How much i

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Question: A sum of $2500 is invested at a simple interest rate of 6% per annum. How much interest will be earned in 4 years?

Options:

Correct Answer: $400

Solution:

Simple Interest = P * r * t = 2500 * 0.06 * 4 = 600.

A sum of $2500 is invested at a simple interest rate of 6% per annum. How much interest will be earned in 4 years?

A sum of $2500 is invested at a simple interest rate of 6% per annum. How much interest will be earned in 4 years?

Step 1: Identify the principal amount (P). In this case, P = $2500.
Step 2: Identify the interest rate (r). Here, the interest rate is 6%, which can be written as a decimal: r = 0.06.
Step 3: Identify the time period (t) in years. In this problem, t = 4 years.
Step 4: Use the simple interest formula: Simple Interest = P * r * t.
Step 5: Substitute the values into the formula: Simple Interest = 2500 * 0.06 * 4.
Step 6: Calculate the interest: 2500 * 0.06 = 150, then 150 * 4 = 600.
Step 7: The total interest earned in 4 years is $600.

Simple Interest – The calculation of interest earned on a principal amount over a specific period at a fixed rate.