Question

A retired couple invested $12000 in bonds at a simple interest rate of 5%. At the end of one year, how much interest did they receive on their investment?

Answer 1

The simple interest formula is

`A=P(1+rt)`

Where A is the final amount, P is the initial principal balance, r is the annual interest rate and t is the time in years.

In our case, (5%=0.05)

`A=12000(1+0.05\cdot1)=12000\cdot(1.05)=12600`

In total, they received $12600 at the end of the year, and 12600-12000=$600 are purely interest.