Question

Edward deposited ​$10,000 into a savings account 2 years ago. The simple interest rate is ​2%. How much money did Edward earn in​ interest?

Interest = [Principal] x [Rate] x [Time]
a) $400
b) $200
c) $100
d) $40

Answer 1

Using the simple interest formula, it's calculated that Edward earned $400 in interest from his $10,000 deposit over 2 years with a 2% interest rate. The correct answer is a) $400.

Step-by-step explanation:

The question asks us to calculate how much money Edward earned in interest from a $10,000 deposit in a savings account with a simple interest rate of 2% over 2 years. To solve this, we use the formula for simple interest, which is Interest = Principal × Rate × Time. Here, the principal is $10,000, the rate is 2%, which is 0.02 when expressed as a decimal, and the time is 2 years.

Substituting the values into the formula, we have:

Interest = $10,000 × 0.02 × 2 = $400.

So, the correct answer is a) $400, which is the amount of interest Edward earned over the 2-year period.