Determine the interest earned on a bank account with a principal of $300 at an interest rate of 2% over 4 years.
Understand the Problem
The question is asking us to calculate the interest earned on a bank account based on a given principal amount, interest rate, and time period. This involves applying the formula for simple interest.
Answer
The interest earned is $24.
Answer for screen readers
The interest earned on the bank account is $24.
Steps to Solve
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Identify the Formula for Simple Interest
The formula for calculating simple interest is given by:
$$ I = P \times r \times t $$
where ( I ) is the interest earned, ( P ) is the principal amount, ( r ) is the interest rate (in decimal), and ( t ) is the time period in years. -
Convert the Interest Rate to Decimal
The interest rate given is 2%. To convert this to a decimal, divide by 100:
$$ r = \frac{2}{100} = 0.02 $$ -
Substitute Values into the Formula
Now, substitute the values into the interest formula:
- ( P = 300 ) (the principal amount)
- ( r = 0.02 ) (the decimal interest rate)
- ( t = 4 ) (the time in years)
So we calculate:
$$ I = 300 \times 0.02 \times 4 $$
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Calculate the Total Interest
Now perform the calculation:
$$ I = 300 \times 0.02 \times 4 = 300 \times 0.08 = 24 $$
Thus, the interest earned is $24.
The interest earned on the bank account is $24.
More Information
Simple interest is straightforward to calculate, and understanding how to convert percentages to decimals is crucial for these calculations. The interest earned can be doubled by increasing any of the variables, like the principal or the time.
Tips
- Not converting the interest rate from a percentage to a decimal before using it in the formula.
- Forgetting to multiply by the time period in years, which can lead to underestimating the interest earned.
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