If a person invests $1000 at an interest rate of 5% per annum, how much interest

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Question: If a person invests $1000 at an interest rate of 5% per annum, how much interest will he earn in 3 years (simple interest)?

Options:

Correct Answer: 100

Solution:

Simple Interest = PRT = 1000 * 5/100 * 3 = 150.

If a person invests $1000 at an interest rate of 5% per annum, how much interest will he earn in 3 years (simple interest)?

If a person invests $1000 at an interest rate of 5% per annum, how much interest will he earn in 3 years (simple interest)?

Step 1: Identify the principal amount (P), which is the initial investment. In this case, P = $1000.
Step 2: Identify the interest rate (R). Here, the interest rate is 5% per annum.
Step 3: Identify the time period (T) for which the money is invested. In this case, T = 3 years.
Step 4: Convert the interest rate from a percentage to a decimal. To do this, divide 5 by 100, which gives you 0.05.
Step 5: Use the simple interest formula: Simple Interest = P * R * T.
Step 6: Substitute the values into the formula: Simple Interest = 1000 * 0.05 * 3.
Step 7: Calculate the result: 1000 * 0.05 = 50, then 50 * 3 = 150.
Step 8: The total interest earned after 3 years is $150.

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