Question

Joshua put 12,000 in a savings account that pays 2.25% simple interest. How much interest will the savings account earn after 2 years?

Answer 1

To calculate the simple interest earned after 2 years on a $12,000 deposit with a 2.25% annual interest rate, you use the formula I = PRT. In this case, the simple interest earned is $540.

Step-by-step explanation:

Calculating Simple Interest

To calculate the simple interest Joshua will earn after 2 years on a $12,000 deposit with an annual interest rate of 2.25%, we use the formula I = PRT, where I is the interest, P is the principal amount (initial deposit), R is the annual interest rate (in decimal form), and T is the time in years the money is invested for.

For Joshua's investment:

• P (Principal) = $12,000
• R (Annual Interest Rate) = 2.25% or 0.0225 in decimal
• T (Time) = 2 years

Therefore, the simple interest earned is calculated as:

I = $12,000 × 0.0225 × 2

First, multiply the rate by the principal:

$12,000 × 0.0225 = $270 per year

Then, multiply this result by the number of years:

$270 × 2 = $540

So, after 2 years, the simple interest earned on the savings account will be $540.