Question

You deposit $1,200 in a savings account that earns simple interest at a rate of 3% per year. How much interest will you have earned after 3 years, using the formula I = Prt?

A) $108
B) $1080
C) $36
D) $324

Answer 1

Using the simple interest formula I = Prt with the values P = $1,200, r = 0.03 (3%), and t = 3 years, we find that the interest earned after 3 years is $108 (Option A).

Step-by-step explanation:

To calculate the simple interest earned on a deposit, we use the formula I = Prt, where I is the interest earned, P is the principal amount deposited, r is the annual interest rate (expressed as a decimal), and t is the time in years. In this scenario, we have a principal amount of $1,200, an annual interest rate of 3%, and a time period of 3 years. We plug these values into the formula to calculate the interest:

I = $1,200 × 0.03 × 3

First, convert the percentage into a decimal by dividing it by 100:

r = 3% / 100 = 0.03

Now calculate the interest:

I = $1,200 × 0.03 × 3 = $108

Therefore, after 3 years, you will have earned $108 in simple interest.