Question

Troy deposited $400 into his savings account. How much interest will he earn at the end of the year if the simple interest rate is 3%?

A) $12
B) $4
C) $120
D) $40

Answer 1

The correct option is A). Troy will earn $12 in simple interest at the end of the year on a $400 deposit with a 3% interest rate.

Step-by-step explanation:

To calculate the simple interest Troy will earn at the end of the year on his $400 deposit with a 3% interest rate, we use the formula for simple interest: I = P × r × t, 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 the money is invested for in years. In this case, P is $400, r is 0.03 (3% expressed as a decimal), and t is 1 year since it's for the end of the year.

So the calculation would be:

$400 × 0.03 × 1 = $12

Therefore, Troy will earn $12 in simple interest at the end of the year.