A bank offers an interest rate of 5% per annum. If you invest $1000, how much in

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Question: A bank offers an interest rate of 5% per annum. If you invest $1000, how much interest will you earn in one year?

Options:

Correct Answer: $50

Solution:

Interest = Principal * Rate = 1000 * 0.05 = $50

A bank offers an interest rate of 5% per annum. If you invest $1000, how much interest will you earn in one year?

A bank offers an interest rate of 5% per annum. If you invest $1000, how much interest will you earn in one year?

Step 1: Identify the principal amount you are investing. In this case, it is $1000.
Step 2: Identify the interest rate offered by the bank. Here, it is 5% per annum.
Step 3: Convert the interest rate from a percentage to a decimal. To do this, divide 5 by 100, which gives you 0.05.
Step 4: Use the formula for calculating interest, which is: Interest = Principal * Rate.
Step 5: Substitute the values into the formula: Interest = 1000 * 0.05.
Step 6: Calculate the result: 1000 * 0.05 = $50.
Step 7: Conclude that you will earn $50 in interest after one year.

Simple Interest Calculation – Understanding how to calculate simple interest using the formula: Interest = Principal * Rate.