The rate should be expressed as a decimal before it is used in the interest formula.
Identify values from the problem.
Principal Value =P=$20,000=P=$20,000
Interest Rate =r=7%per annum=0.07(as a decimal)=r=7%per annum=0.07(as a decimal)
Time Elapsed =t=3=t=3 years
Solve for the Simple Interest Earned
II
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PPrrtt
Simple Interest Formula
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$20,000$20,000××0.070.07××33
Substitute known values
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$4,200$4,200
Solve for the Total Amount
Total Amount
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$20,000+$4,200$20,000+$4,200
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$24,200$24,200
$24,200$24,200 total amount
Question 2 of 5
2. Question
Carrie deposits $2,000$2,000 into a special bank account which earns $450$450 at the end of five years. What is the annual interest rate expressed as a percentage?