Question

$85000 is invested at 7.5% per annum simple interest for 5 years. Calculate the simple interest.

Answer 1

From the statement of the problem we know that:

• the principal amount of money invested is P = $85000,

,

• the rate per year is 7.5%, in decimals r = 0.075,

,

• the time is t = 5 years.

The interest earnt I is equal to the difference between the total accrued amount A and the principal amount P:

`I=A-P=P(1+r\cdot t)-P=P\cdot r\cdot t.`

Replacing by the data of the problem we find that the simple interest is:

`I=85000\cdot0.075\cdot5=31875.`

Answer

The simple interest is $31875.