The total simple interest earned in the time of 10 years when investing a principal amount of $500 at the rate of interest of 1.7% is $85.
What do we mean by interest on investment?
When we invest an amount, we receive the benefits of investing the amount. The benefit is called the interest. The interest is usually earned in monetary terms only.
Two common types of interest earned are:
- Simple interest (S.I.): S.I. = Pnr
- Compound Interest (C.I.): C.I. = P{1 - (1 + r)ⁿ)}
In the above formulas, P is the Principal amount invested, n is the time for investment, and r is the rate of interest.
How do we solve the given question?
In the question, we are said that Dean invests $500 for 10 years at a rate of 1.7% per year simple interest.
We are asked to find the total interest Dean earned in the time of 10 years.
We will use the formula for simple interest (S.I.), according to which:
S.I. = Pnr, where P is the Principal amount invested, n is the time for investment, and r is the rate of interest.
In our case,
The principal investment P = $500
The rate of interest r = 1.7%
The time for investment n = 10 years.
∴ Simple Interest (S.I.) = $500*10*1.7% = $5000*0.017 = $85
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