Question

Trey deposits $8000 into an account that pays simple interest at a rate of 5% per year. How much interest will he be paid in the first 4 years

6

Answer 1

1600

Explanation:

You want to calculate the interest on $8000 at 5% interest per year after 4 year(s).

The formula we'll use for this is the simple interest formula, or:

Where:

P is the principal amount, $8000.00.

r is the interest rate, 5% per year, or in decimal form, 5/100=0.05.

t is the time involved, 4....year(s) time periods.

So, t is 4....year time periods.

To find the simple interest, we multiply 8000 × 0.05 × 4 to get that:

The interest is: $1600.00

Usually now, the interest is added onto the principal to figure some new amount after 4 year(s),

or 8000.00 + 1600.00 = 9600.00. For example:

If you borrowed the $8000.00, you would now owe $9600.00

If you loaned someone $8000.00, you would now be due $9600.00

If owned something, like a $8000.00 bond, it would be worth $9600.00 now.