Question

How much simple interest is earned after 5 years if a bank lends $10,000 to a business for 8 percent a year

Answer 1

To calculate the simple interest earned, you can use the formula:

\[
\text{Simple Interest} = P \times r \times t
\]

Where:
- \( P \) is the principal amount (the initial amount of money),
- \( r \) is the rate of interest per year (as a decimal),
- \( t \) is the time the money is lent for, in years.

In this case:
- \( P = 10,000 \)
- \( r = 0.08 \) (8 percent as a decimal)
- \( t = 5 \) years

Now, plug the values into the formula:

\[
\text{Simple Interest} = 10,000 \times 0.08 \times 5
\]

Calculating that gives:

\[
\text{Simple Interest} = 10,000 \times 0.08 = 800
\]
\[
\text{Simple Interest} = 800 \times 5 = 4,000
\]

So, the simple interest earned after 5 years is **$4,000**.