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If you invest $5,000 at an annual simple interest rate of 4%, how much interest will you earn in 3 years?

Question

If you invest $5,000 at an annual simple interest rate of 4%, how much interest will you earn in 3 years?

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Solution

To calculate the simple interest, you can use the formula:

Interest = Principal x Rate x Time

where:

  • Principal is the initial amount of money that was invested, which in this case is $5,000.
  • Rate is the annual interest rate, which in this case is 4% or 0.04 when expressed as a decimal.
  • Time is the number of years the money is invested for, which in this case is 3 years.

Substituting these values into the formula gives:

Interest = $5,000 x 0.04 x 3

So, the interest earned in 3 years would be $600.

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