Questions: You receive an inheritance of 12,500, and you place the full amount into a bank account. The bank pays a simple interest rate of 7.5%. How much interest will you have earned after three years? Round your answer to the nearest cent.

Solution Steps

To calculate the simple interest earned on an investment, we use the formula: Interest = Principal × Rate × Time. Here, the principal is $12,500, the rate is 7.5% (or 0.075 as a decimal), and the time is 3 years. We will plug these values into the formula to find the interest earned.

We are given the following values:

• Principal (\(P\)) = \$12,500
• Rate (\(r\)) = 7.5% = \(\frac{7.5}{100} = 0.075\)
• Time (\(t\)) = 3 years

The formula for simple interest (\(I\)) is: \[ I = P \times r \times t \] Substituting the given values: \[ I = 12,500 \times 0.075 \times 3 \]

Perform the multiplication: \[ I = 12,500 \times 0.075 \times 3 = 2,812.5 \]

The interest calculated is already rounded to the nearest cent, as it is a whole number with one decimal place.

Final Answer