Question

What is the interest on $560 invested for 7 years in an account that earns simple interest at a rate of 1.6% per year?

a) $64.96
b) $78.40
c) $89.60
d) $95.20

Answer 1

The correct interest on $560 invested for 7 years in an account that earns simple interest at a rate of 1.6% per year is $89.60 (c).

Step-by-step explanation:

To calculate simple interest, the formula
`\(I = P * R * T\)` is used, where:

- I is the interest,

- P is the principal amount,

- R is the rate of interest per period, and

- T is the time the money is invested or borrowed for.

In this scenario, P = $560,
`\(R = 1.6\%\)`, and T = 7 years. Plugging these values into the formula, we get
`\(I = 560 * 0.016 * 7 = $89.60\)`. Therefore, the correct interest earned over 7 years is $89.60.

It's crucial to ensure accurate calculations, as small errors can lead to incorrect answers. Simple interest is a linear calculation, where the interest remains constant each year based on the original principal amount.

In conclusion, the accurate answer is (c) $89.60, reflecting the correct total interest earned over the 7-year period with a simple interest rate of 1.6% per year.