The consideration given to the bank for providing loan facility, in return of such facility an amount is paid which is over and above the principle amount of loan, this amount can be said as interest.
Interest are of two types i.e. (a) Simple interest (b) compound interest
The amount of interest which is calculated at a fixed predetermined rate every year on the principle amount and paid until the loan is settled in full.
Given in the Question
Principle is $20,000
Rate is 3%
Time is 1 year
The simple interest is calculated by multiplying principle with the rate and than the outcome is multiplied with time to find simple interest.
[tex]\begin{aligned} \rm \ Simple\:Interest&= Principle \times Rate \times Time\\ \\ \rm \ Simple\:Interest&= \$ 20,000 \times 3 \times 1\\ \\ \rm \ Simple\:Interest&= \$600 \end[/tex]
Therefore the amount of interest received by Michael at the end of first year on an amount of $20,000 at a interest rate of 3%will be $600.
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