Question

John invested a sum of money, which earned $450 in simple interest at a rate of 5% per annum over 3 years. The amount invested was ____

A) $6,750
B) $135
C) $4,500
D) $3,000

Answer 1

John invested $3,000 to earn $450 in simple interest at a rate of 5% per annum over 3 years. This is calculated by dividing the total interest earned by the product of the annual interest rate and the time period.

Step-by-step explanation:

To determine the amount invested by John that earned $450 in simple interest at a rate of 5% per annum over 3 years, we can use the formula for simple interest:

I = P × r × t, where:

• I is the interest earned,
• P is the principal (the initial amount invested),
• r is the annual interest rate (in decimal form), and
• t is the time in years.

Given that the interest (I) is $450, the rate (r) is 5% or 0.05, and time (t) is 3 years, we can set up the equation:

450 = P × 0.05 × 3

To find P, we rearrange the equation to solve for P:

P = 450 / (0.05 × 3)

P = 450 / 0.15

P = $3,000

Therefore, John invested $3,000 to earn $450 in simple interest over 3 years, which corresponds to option D).