Question

What is the simple interest of $250 at 5% for 3 years.

A) $37.50
B) $45.00
C) $62.50
D) $75.00

Answer 1

The simple interest on a $250 loan at a 5% interest rate over 3 years is calculated using the formula I = P × r × t. After performing the calculation ($250 × 0.05 × 3), we find that the simple interest is $37.50, corresponding to option A.

Step-by-step explanation:

The question asks us to calculate the simple interest on a $250 loan at a rate of 5% for 3 years. To find the simple interest, we use the formula which is the product of the principal amount (P), the interest rate (r), and the time (t) the money is borrowed for. In formula form, it is I = P × r × t.

Using the given values:

• Principal (P) = $250
• Interest Rate (r) = 5% or 0.05 in decimal form
• Time (t) = 3 years

Now, plugging these values into the formula:

I = $250 × 0.05 × 3

I = $37.50

Therefore, the simple interest on a $250 loan at 5% for 3 years is $37.50, which corresponds to option A.