Question

Frank has $500 in a savings account that earns 2% interest per year. The interest is not compounded. How much interest will Frank earn in 5 years?

Answer 1

$50 interest

Explanation:

Simple interest formula

I = Prt

where:

• I = interested earned
• P = principal amount
• r = interest rate (in decimal form)
• t = time (in years)

Given:

• P = $500
• r = 2% = 0.02
• t = 5 years

Substitute the given values into the formula and solve for I:

⇒ I = 500 · 0.02 · 5

⇒ I = 50

Therefore, Frank will earn $50 interest in 5 years.