Question

With an initial investment of $10,000, how much total interest would you earn after 4 years with simple interest?

a) $1,600
b) $2,400
c) $4,000
d) $10,400

Answer 1

With an initial investment of $10,000, the total interest earned after 4 years with simple interest is $1,600.

Step-by-step explanation:

Compound interest is calculated using the formula: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount (initial investment), r is the annual interest rate, n is the number of times interest is compounded per year, and t is the number of years. However, in this question, we are dealing with simple interest, which is calculated using the formula: I = PRT, where I is the interest, P is the principal amount, R is the annual interest rate, and T is the time in years.

In this case, the principal amount is $10,000, the interest rate is not given, but we assume it is a simple interest rate, and the time is 4 years. Using the formula I = PRT, we can calculate the interest as follows:

I = (10,000)(R)(4)

Now, we need to solve for R. Since the interest is not given, we have to assume a value for R in order to calculate it. Let's assume an interest rate of 4%. Substituting this value into the equation, we get:

I = (10,000)(0.04)(4)

I = $1,600

Therefore, the correct answer is $1,600 (option a).