Question

The simple interest formula, I = P ⋅ R ⋅ T , gives the interest, I , on a principal, P , invested at a rate, R per annum for time, T years. Find the simple interest on 3,600.00 at 15% per annum for 2 years.

a) 1,080.00
b) 1,200.00
c) 1,440.00
d) 1,560.00

Answer 1

The simple interest on a principal amount of $3,600 at a rate of 15% per annum for 2 years is $1,080, calculated by multiplying the principal by the rate and then by the time (I = $3,600 × 0.15 × 2).

Step-by-step explanation:

To find the simple interest on a principal amount of $3,600 at a rate of 15% per annum for 2 years, we can use the simple interest formula I = P · R · T. Plugging in the values, we get:

I = $3,600 · 0.15 · 2

Now, we calculate the simple interest:

I = $3,600 · 0.15 · 2 = $540 · 2 = $1,080

So the correct answer is a) $1,080.00.

Example 1: A $100 deposit at a simple interest rate of 5% held for one year would incur:

$100 · 0.05 · 1 = $5

This shows how the formula works with different principal amounts, rates, and time periods. To compare, a total future amount with simple interest would be calculated as the original principal plus the interest earned, as shown in the example:

Total future amount = principal + interest

= $100 + ($100 · 0.05 · 3) = $115