Find the simple interest earned on a savings account, where five thousand six hundred dollars is deposited for seven years if the interest rate is ten percent per year.
Before we solve this problem, we need to review what simple interest is. Interest is money earned for the use of money. In this case, you’re allowing the bank to use your money; you’re investing your money in a savings account, and they’re going to pay you ten percent per year.
And we can calculate the interest we earned with this formula. We multiply the principal by the rate and the time. Our principal is the initial money we invested, in this case five thousand six hundred dollars. The rate is the yearly interest rate written as a decimal. And last, our time is how long will you keep your money there in years. We’ve been given all three of these things: the principal, the rate, and the time in this problem. We’ve been given all three of these things: the principal, the rate, and the time in the problem. Principal, five thousand six hundred dollars, rate, ten percent, and time, seven years.
Now I need to plug that information into our formula. Don’t forget that we need to convert this ten percent into a decimal when we plug it into our formula. So I’ll use zero decimal one zero for the rate and our time of course, seven years. Now it’s just a matter of multiplying five thousand six hundred by ten hundredths times seven. When you finish multiplying, you’ll find that the interest is three thousand nine hundred and twenty dollars.