Velma Invested $ \$5400 $ In A Savings Account With A Yearly Interest Rate Of $ 4\% $ For 7 Years. How Much Simple Interest Did She Earn?A. $ \$152 $ B. $ \$3400 $ C. $ \$1512 $ D. $ \$304 $

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Introduction

Simple interest is a fundamental concept in mathematics that helps us calculate the interest earned on an investment over a specific period. In this article, we will explore how to calculate simple interest using a real-life example. Velma invested $5400 in a savings account with a yearly interest rate of 4% for 7 years. We will use this example to demonstrate how to calculate the simple interest earned.

What is Simple Interest?

Simple interest is the interest earned on an investment over a specific period, usually expressed as a percentage of the principal amount. It is calculated by multiplying the principal amount by the interest rate and the time period. The formula for simple interest is:

Simple Interest = Principal Amount x Interest Rate x Time Period

Calculating Simple Interest

Now that we have the formula, let's calculate the simple interest earned by Velma. We know the principal amount ($5400), the interest rate (4%), and the time period (7 years). We can plug these values into the formula:

Simple Interest = $5400 x 4% x 7 years

First, we need to convert the interest rate from a percentage to a decimal. To do this, we divide the percentage by 100:

4% = 4 Ă· 100 = 0.04

Now we can multiply the principal amount by the interest rate and the time period:

Simple Interest = $5400 x 0.04 x 7

To calculate the simple interest, we need to multiply the numbers together:

Simple Interest = $5400 x 0.04 = $216 Simple Interest = $216 x 7 = $1512

Conclusion

In this article, we calculated the simple interest earned by Velma on her investment of $5400 in a savings account with a yearly interest rate of 4% for 7 years. We used the formula for simple interest and plugged in the values to get the result. The simple interest earned by Velma is $1512.

Answer

The correct answer is C. $1512.

Discussion

This example demonstrates how to calculate simple interest using a real-life scenario. Simple interest is an important concept in mathematics that helps us understand how interest is earned on investments. By using the formula for simple interest, we can calculate the interest earned on an investment over a specific period.

Real-World Applications

Simple interest has many real-world applications, including:

  • Calculating interest on loans and credit cards
  • Determining the interest earned on investments, such as savings accounts and certificates of deposit
  • Understanding the impact of interest rates on the economy

Tips and Tricks

Here are some tips and tricks to help you calculate simple interest:

  • Make sure to convert the interest rate from a percentage to a decimal before calculating the simple interest.
  • Use the formula for simple interest to calculate the interest earned on an investment.
  • Plug in the values into the formula and multiply the numbers together to get the result.

Conclusion

Introduction

In our previous article, we explored how to calculate simple interest using a real-life example of Velma's savings account. We calculated the simple interest earned by Velma on her investment of $5400 in a savings account with a yearly interest rate of 4% for 7 years. In this article, we will answer some frequently asked questions about simple interest.

Q&A

Q: What is the formula for simple interest?

A: The formula for simple interest is:

Simple Interest = Principal Amount x Interest Rate x Time Period

Q: How do I convert a percentage to a decimal?

A: To convert a percentage to a decimal, divide the percentage by 100. For example, 4% = 4 Ă· 100 = 0.04.

Q: What is the difference between simple interest and compound interest?

A: Simple interest is the interest earned on an investment over a specific period, usually expressed as a percentage of the principal amount. Compound interest, on the other hand, is the interest earned on both the principal amount and any accrued interest over a specific period.

Q: How do I calculate the simple interest earned on a loan?

A: To calculate the simple interest earned on a loan, use the formula:

Simple Interest = Principal Amount x Interest Rate x Time Period

Q: What is the interest rate on a savings account?

A: The interest rate on a savings account can vary depending on the bank and the type of account. Typically, savings accounts offer a lower interest rate than other types of investments.

Q: How long does it take to earn a certain amount of interest on a savings account?

A: The time it takes to earn a certain amount of interest on a savings account depends on the interest rate and the principal amount. You can use the formula for simple interest to calculate the time it takes to earn a certain amount of interest.

Q: Can I use the formula for simple interest to calculate the interest earned on a credit card?

A: Yes, you can use the formula for simple interest to calculate the interest earned on a credit card. However, keep in mind that credit card interest rates are typically higher than those for savings accounts.

Q: What is the impact of interest rates on the economy?

A: Interest rates can have a significant impact on the economy. When interest rates are high, it can make borrowing more expensive and reduce economic growth. When interest rates are low, it can make borrowing cheaper and stimulate economic growth.

Conclusion

In conclusion, simple interest is an important concept in mathematics that helps us calculate the interest earned on an investment over a specific period. By using the formula for simple interest and plugging in the values, we can calculate the interest earned on an investment. We hope this article has provided you with a better understanding of simple interest and answered some of your frequently asked questions.

Real-World Applications

Simple interest has many real-world applications, including:

  • Calculating interest on loans and credit cards
  • Determining the interest earned on investments, such as savings accounts and certificates of deposit
  • Understanding the impact of interest rates on the economy

Tips and Tricks

Here are some tips and tricks to help you calculate simple interest:

  • Make sure to convert the interest rate from a percentage to a decimal before calculating the simple interest.
  • Use the formula for simple interest to calculate the interest earned on an investment.
  • Plug in the values into the formula and multiply the numbers together to get the result.

Conclusion

In conclusion, simple interest is an important concept in mathematics that helps us calculate the interest earned on an investment over a specific period. By using the formula for simple interest and plugging in the values, we can calculate the interest earned on an investment. We hope this article has provided you with a better understanding of simple interest and answered some of your frequently asked questions.