Chloe deposits $2,000 in a money market account. The bank offers a simple interest rate of 1.2%. How much interest will she earn in 10 years? (Simple interest formula:

Question

I
=
p
r
t
I=prt )

Answer 1

To calculate the interest earned using the simple interest formula \( I = p \cdot r \cdot t \), we can break down the variables:

• \( p \) = principal amount (the initial amount of money deposited) = $2,000
• \( r \) = annual interest rate (in decimal) = 1.2% = 0.012
• \( t \) = time (in years) = 10 years

Now, substituting these values into the formula:

\[ I = p \cdot r \cdot t \] \[ I = 2000 \cdot 0.012 \cdot 10 \] \[ I = 2000 \cdot 0.12 \] \[ I = 240 \]

So, Chloe will earn $240 in interest after 10 years.