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If $250 is invested at a bond that pays 7% simple interest, what is the annual interest earned?

A. $17.50
B. $35.00
C. $70.00
D. $175.00

1 Answer

3 votes

Final answer:

The annual interest earned on a $250 investment at 7% simple interest is $17.50. The calculation uses the simple interest formula, resulting in option A being the correct answer.

Step-by-step explanation:

If $250 is invested in a bond that pays 7% simple interest, the annual interest earned can be found using the simple interest formula I = PRT, where I represents the interest earned, P is the principal amount invested, R is the annual interest rate in decimal form, and T is time in years. For this question, P = $250, R = 0.07 (7% as a decimal), and T = 1 year (since we are looking for annual interest). Therefore, the calculation is as follows: I = $250 * 0.07 * 1 = $17.50.

The correct answer to the question of how much annual interest is earned on a $250 investment at 7% simple interest is A. $17.50.

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