Question

What is the amount of interest earned after two years on a $100 deposit paying 4 percent simple interest annually?

Answer 1

$8

Step-by-step explanation:

The yearly amount of interest earned on a $100 deposit at 4 percent rate is:

`Ai=$100*0.04\\Ai=\$4`

Since simple interest investments yield a constant interest each year, the amount earned after two years is:

`I=2*\$4\\I=\$8`

The total amount earned is $8.