Rene deposits 4000 in a savings account that earns 4 simple

Rene deposits $4,000 in a savings account that earns 4% simple interest per year. How much interest will she earn after 3 years?

A. $112

B. $350

C. $380

D. $480

Solution

D. Simple interest problems use the formula I = prt, where I is the amount of interest, p is the principal or the amount saved or invested, r is the rate of interest, and t is the amount of time that the interest is accruing. In this problem, you are asked to find the interest, given that the principal is $4,000, the rate of interest is 4%, and the amount of time is 3 years. Substituting this information into the formula, you get

I = 4,000(0.04)(3) = $480 of interest