A person invests $5000 at a simple interest rate of 8% per annum. How much inter

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Question: A person invests $5000 at a simple interest rate of 8% per annum. How much interest will he earn in 2.5 years?

Options:

Correct Answer: $600

Solution:

Simple Interest = 5000 × 8 × 2.5 / 100 = $1000.

A person invests $5000 at a simple interest rate of 8% per annum. How much interest will he earn in 2.5 years?

A person invests $5000 at a simple interest rate of 8% per annum. How much interest will he earn in 2.5 years?

Step 1: Identify the principal amount (the initial investment). In this case, it is $5000.
Step 2: Identify the interest rate. Here, it is 8% per annum.
Step 3: Identify the time period for which the money is invested. In this case, it is 2.5 years.
Step 4: Use the simple interest formula: Simple Interest = Principal × Rate × Time / 100.
Step 5: Plug in the values: Simple Interest = 5000 × 8 × 2.5 / 100.
Step 6: Calculate the multiplication: 5000 × 8 = 40000.
Step 7: Multiply the result by 2.5: 40000 × 2.5 = 100000.
Step 8: Divide by 100 to find the interest: 100000 / 100 = 1000.
Step 9: The total interest earned in 2.5 years is $1000.

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