Question

Tom deposits $2000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 3 years?

Answer 1

The formula for simple interest is the following:

`I=(P*r*t)/(100)`

Where I is the earned interest, P is the principal or money invested, r is the annual interest rate and t is the time in years.

The given information is P=$2000, r=5% and t=3 years.

Replace these values and solve for I:

`\begin{gathered} I=(2000*5\%*3)/(100\%) \\ I=(30000)/(100) \\ I=300 \end{gathered}`

He will be paid $300 in the first 3 years.