Eric deposits $800 into an account that pays simple interest at a rate of 3% per year. How much interest will he be paid in the first 5 years?

Answer 1

To calculate the simple interest earned over a period of time, 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 annual interest rate (in decimal form),
• \( t \) is the time the money is invested or borrowed for, in years.

In this case:

• \( P = 800 \) (the initial deposit),
• \( r = 0.03 \) (3% expressed as a decimal),
• \( t = 5 \) (the number of years).

Now, plug in the values:

\[ \text{Interest} = 800 \times 0.03 \times 5 \]

Calculating this step-by-step:

1. Calculate \( 800 \times 0.03 = 24 \).
2. Then, calculate \( 24 \times 5 = 120 \).

So, the total interest earned in the first 5 years will be:

\[ \text{Interest} = 120 \]

Therefore, Eric will be paid $120 in interest after the first 5 years.