Question

You earn $10.00/hour. You invest $4,000.00 at an interest rate of 5% APR for a year. How much interest did that savings earn in a year in terms of hours of work?
(1 point)
Responses

100 hours
100 hours

20 hours
20 hours

40 hours
40 hours

400 hours

Answer 1

To calculate how much interest your investment earns in a year, you can use the formula for simple interest:

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

In this case:

- Principal = $4,000
- Rate = 5% = 0.05
- Time = 1 year = 1

Now, plug the values into the formula:

\[ \text{Interest} = 4000 \times 0.05 \times 1 = 200 \]

So, the total interest earned in a year is $200.

Next, to find out how many hours of work this corresponds to, divide the total interest by your hourly wage:

\[ \text{Hours} = \frac{\text{Interest}}{\text{Hourly Wage}} = \frac{200}{10} = 20 \text{ hours} \]

Therefore, the savings earned 20 hours of work in terms of interest.

**The answer is 20 hours.**