Question

Eric deposits $5000 into an account that pays simple interest at a rate of 4% per year. How much interest will he be paid in the first 4 years?

Answer 1

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

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

where:
- \( P \) is the principal amount (the initial amount of money),
- \( r \) is the rate of interest (in decimal form),
- \( t \) is the time the money is invested (in years).

In this case, Eric deposits \( P = 5000 \) dollars, the annual interest rate \( r = 4\% = 0.04 \), and he keeps the money in the account for \( t = 4 \) years.

Now, let's plug these values into the formula:

\[
\text{Interest} = 5000 \times 0.04 \times 4
\]

Calculating this step-by-step:

1. First calculate \( 0.04 \times 4 \):
\[
0.04 \times 4 = 0.16
\]

2. Now multiply by \( 5000 \):
\[
\text{Interest} = 5000 \times 0.16 = 800
\]

Therefore, the amount of interest Eric will be paid in the first 4 years is **$800**.