Find the simple interest for $1,000 at a 7% interest rate over 2 years.
Understand the Problem
The question is asking for the calculation of simple interest based on the provided principal amount, interest rate, and time duration. To solve it, we will use the formula for simple interest, which is I = P * r * t, where I is the interest, P is the principal amount, r is the rate of interest per year, and t is the time in years.
Answer
$140$
Answer for screen readers
The simple interest is $140$.
Steps to Solve
- Identify the values The problem provides the following values:
- Principal amount ($P$): $1,000
- Interest rate ($r$): $7%$ (or $0.07$ when expressed as a decimal)
- Time ($t$): $2$ years
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Use the simple interest formula The formula for calculating simple interest is: $$ I = P \times r \times t $$
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Substitute the values into the formula Now we substitute the values into the simple interest formula: $$ I = 1000 \times 0.07 \times 2 $$
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Calculate the interest Now we perform the calculations:
- First, calculate $1000 \times 0.07 = 70$.
- Then, multiply $70 \times 2 = 140$.
Thus, the simple interest is $$ I = 140 $$.
The simple interest is $140$.
More Information
Simple interest is a method to calculate the interest charge on a loan or investment based on the original principal amount. In this problem, the interest accrued over 2 years at a rate of 7% on a principal of $1,000 amounts to $140.
Tips
- Not converting the percentage to a decimal before using it in calculations. Remember to convert $7%$ to $0.07$ by dividing by 100.
- Forgetting to multiply by the time period, which is crucial to determine the total interest for a specific duration.
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