If a person invests $1,000 at a 5% interest rate for 2 years, what is the amount of simple interest earned?

If a person invests $1,000 at a 5% interest rate for 2 years, what is the amount of simple interest earned?

• A. $50
• B. $100
• C. $75
• D. $125

Answer: (B)

To determine the amount of simple interest earned from an investment, the formula used is: \[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \] In this scenario, the principal is $1,000, the interest rate is 5% (or 0.05 when expressed as a decimal), and the time is 2 years. Plugging these values into the formula gives: \[ \text{Interest} = 1000 \times 0.05 \times 2 \] Calculating this step-by-step: 1. First, calculate the interest for one year: \[ 1000 \times 0.05 = 50 \] 2. Since the investment lasts for 2 years, multiply the one-year interest by 2: \[ 50 \times 2 = 100 \] Thus, the total simple interest earned over the 2 years is $100. This matches the answer provided, which indicates that the calculations were executed correctly based on the variables in the formula. Therefore, the amount of simple interest earned from the investment after 2 years at a 5% interest rate is indeed $

To determine the amount of simple interest earned from an investment, the formula used is:

[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} ]

In this scenario, the principal is $1,000, the interest rate is 5% (or 0.05 when expressed as a decimal), and the time is 2 years.

Plugging these values into the formula gives:

[ \text{Interest} = 1000 \times 0.05 \times 2 ]

Calculating this step-by-step:

1. First, calculate the interest for one year:

[ 1000 \times 0.05 = 50 ]

2. Since the investment lasts for 2 years, multiply the one-year interest by 2:

[ 50 \times 2 = 100 ]

Thus, the total simple interest earned over the 2 years is $100. This matches the answer provided, which indicates that the calculations were executed correctly based on the variables in the formula.

Therefore, the amount of simple interest earned from the investment after 2 years at a 5% interest rate is indeed $