Question

Tom deposits $2000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

Answer 1

The formula for simple interest is the following:

$I=\frac{P*r*t}{100}$

Where I is the earned interest, P is the principal or money invested, r is the annual interest rate and t is the time in years.

The given information is P=$2000, r=5% and t=3 years.

Replace these values and solve for I:

$\begin{gathered} I=\frac{2000*5\%*3}{100\%} \\ I=\frac{30000}{100} \\ I=300 \end{gathered}$

He will be paid $300 in the first 3 years.