Final answer:
To find the interest earned after 4 years on a $500 deposit with 8% simple interest, you use the formula I = PRT, which results in an interest of $160.You deposit $500 in a savings account which earns 8% Simple interest per year. To calculate the interest earned after 4 years, you can use the formula for simple interest:
Step-by-step explanation:
You deposit $500 in a savings account which earns 8% Simple interest per year. To calculate the interest earned after 4 years, you can use the formula for simple interest: I = PRT, where I is the interest, P is the principal amount (initial amount of money), R is the rate of interest per year, and T is the time in years.
Based on the given information:
- P = $500
- R = 8% or 0.08 as a decimal
- T = 4 years
Substituting these values into the formula:
I = 500 × 0.08 × 4
I = $160
So, the interest earned after 4 years is $160.
Simple Interest (S.I) is the method of calculating the interest amount for some principal amount of money. Have you ever borrowed money from your siblings when your pocket money is exhausted? Or lent him maybe? What happens when you borrow money? You use that money for the purpose you had borrowed it in the first place. After that, you return the money whenever you get the next month’s pocket money from your parents. This is how borrowing and lending work at home.
But in the real world, money is not free to borrow. You often have to borrow money from banks in the form of a loan. During payback, apart from the loan amount, you pay some more money that depends on the loan amount as well as the time for which you borrow. This is called simple interest. This term finds extensive usage in banking.