Questions: Diane deposits 7000 into an account that pays simple interest at a rate of 3% per year. How much interest will she be paid in the first 6 years?

Diane deposits 7000 into an account that pays simple interest at a rate of 3% per year. How much interest will she be paid in the first 6 years?

Transcript text: Diane deposits $\$ 7000$ into an account that pays simple interest at a rate of $3 \%$ per year. How much interest will she be paid in the first 6 years?

Solution

Solution Steps

To find the simple interest paid on an account, we use the formula for simple interest: $ I = P \times r \times t $, where $ I $ is the interest, $ P $ is the principal amount, $ r $ is the rate of interest per year, and $ t $ is the time in years. In this case, we need to calculate the interest for a principal of $7000 at a rate of 3% over 6 years.

Step 1: Identify the Variables

We have the following values:

Principal amount $ P = 7000 $
Interest rate $ r = 0.03 $
Time period $ t = 6 $

Step 2: Apply the Simple Interest Formula

The formula for simple interest is given by: \[ I = P \times r \times t \] Substituting the known values into the formula: \[ I = 7000 \times 0.03 \times 6 \]

Step 3: Calculate the Interest

Calculating the interest: \[ I = 7000 \times 0.03 \times 6 = 1260 \]