Simple interest on a 5,000 loan at 5% for 3 years equals what amount of interest?

Simple interest on a 5,000 loan at 5% for 3 years equals what amount of interest?

• A. 750
• B. 150
• C. 1000
• D. 1200

Answer: (A)

Simple interest is found by multiplying the principal by the annual rate and the time in years. I = P × r × t. Here, P = 5,000, r = 0.05 (5%), and t = 3 years. So I = 5,000 × 0.05 × 3 = 5,000 × 0.15 = 750. So the interest is 750. The other numbers come from misapplying the rate or time (for example, a higher annual rate or a different time period would yield those amounts), but with a 5% yearly rate over three years, the total interest is 750.

Simple interest is found by multiplying the principal by the annual rate and the time in years. I = P × r × t.

Here, P = 5,000, r = 0.05 (5%), and t = 3 years. So I = 5,000 × 0.05 × 3 = 5,000 × 0.15 = 750.

So the interest is 750. The other numbers come from misapplying the rate or time (for example, a higher annual rate or a different time period would yield those amounts), but with a 5% yearly rate over three years, the total interest is 750.