If a sum of $1200 is invested at an annual simple interest rate of 5% for 2 years, what is the total interest earned?
Answer: $120
Explanation
To find the interest earned using the simple interest formula, use:
Simple Interestย =ย ๐ย รย ๐ย รย ๐ก
where:
P is the principal amount ($1200),
r is the annual interest rate (5% or 0.05),
t is the time in years (2 years).
Substitute the values into the formula:
Simple Interest=1200ร0.05ร2
Calculate:
Simple Interest=1200ร0.05=60
Simple Interest=60ร2=120
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