Question

You invest $2,000.00 at a rate of 4% APR for a 3 months. How much interest did you earn?
(1 point)
Responses

$80.00
$80.00

$40.00
$40.00

$20.00
$20.00

$10.00

Answer 1

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

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

Where:
- Principal is the initial amount of money invested ($2,000.00 in this case)
- Rate is the annual interest rate (4% or 0.04)
- Time is the duration of the investment in years (3 months is 0.25 years)

Now plug in the values:

\[ \text{Interest} = 2000 \times 0.04 \times 0.25 \]

Calculating step by step:

1. Calculate the rate times time:
\[ 0.04 \times 0.25 = 0.01 \]

2. Now multiply by the principal:
\[ 2000 \times 0.01 = 20 \]

Thus, the interest earned is **$20.00**.

The correct response is:
**$20.00**