Answer:
$ 630
Explanation:
One is given the following information:
- $7000 was invested in a savings account
- Option A: 3% simple interest annually
- Option B: 4% interest compounded annually
The problem asks one to find out the amount of interest earned after 3 years of going with option A. The easiest way to do such is to form an equation. The general equation for simple interest is the following:
A * 0.01P(d) = I
Where the parameters indicate the following values,
A = amount invested
P = interest rate
d = time invested (years)
I = amount earned in the form of interest
Substitute the given values into the formula, then simplify to evaluate,
A * 0.01P(d) = I
7000 * 0.01(3)(3) = I
7000 * 0.01(9) = I
7000 * 0.09 = I
630 = I