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PINTEREST EARNED You deposit \(\ 120\) in a savings account that pays an annual interest rate of \(2.5 \% .\) How much simple interest would you earn in 2 years? (Review 1.1 )

Short Answer

Expert verified
The simple interest earned in 2 years would be \$6.

Step by step solution

01

Identify the variables in the problem

We have the principal \(P = \$120\), the annual interest rate \(r = 2.5\% = 0.025\) as a decimal, and the time \(t = 2\) years.
02

Use the formula for simple interest

We substitute the above values into the simple interest formula \(I = P*r*t\) where \(I\) is the interest.
03

Compute the interest

Now we perform the calculation: \(I = 120 * 0.025 * 2 = \$6\)

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