Question

Alfred wants to invest $4,000 at 6% simple interest rate for 5 years. How much interest will he receive?

• A. $240
• B. $480
• C. $720
• D. $960
• E. $1,200

Hint:

For simple interest, you can calculate the interest for one year and then multiply by the total number of years. This can sometimes make the mental math easier.

Answer 1

Answer: (E)

Step 1: Understanding the Concept:
This problem requires the calculation of simple interest, which is interest earned only on the initial principal amount.
Step 2: Key Formula or Approach:
The formula for simple interest (I) is: \[ I = P \times R \times T \] Where:
P = Principal amount (the initial amount of money)
R = Annual interest rate (in decimal form)
T = Time (in years)
Step 3: Detailed Explanation:
Identify the values from the problem:
Principal (P) = $4,000
Annual Interest Rate (R) = 6% = 0.06
Time (T) = 5 years
Now, substitute these values into the formula: \[ I = \$4,000 \times 0.06 \times 5 \] Calculate the interest per year first: \[ \$4,000 \times 0.06 = \$240 \text{ per year} \] Now, multiply by the number of years: \[ I = \$240 \times 5 = \$1,200 \] Step 4: Final Answer:
Alfred will receive $1,200 in interest. The correct option is (E).