Question

a banker invested $12,500 into an account that pays 2.4% annual simple interest. no additional deposits or withdrawals will be made. which amount is closest to the interest earned on the account at the end of 5 years? $300 $1,500 $14,000 $150,000

Explanation:

Step1: Recall simple interest formula

The formula for simple interest is \( I = P \times r \times t \), where \( P \) is the principal amount, \( r \) is the annual interest rate (in decimal), and \( t \) is the time in years.

Step2: Identify values

Given \( P = \$12,500 \), \( r = 2.4\% = 0.024 \) (converted to decimal), and \( t = 5 \) years.

Step3: Calculate interest

Substitute the values into the formula:
\( I = 12500 \times 0.024 \times 5 \)
First, calculate \( 12500 \times 0.024 = 300 \)
Then, \( 300 \times 5 = 1500 \)

Answer:

\$1,500 (the option with \$1,500)