Find the interest and amount when GH₵400.00 is saved for 3 years at 6%.
Answer (1)
Calculate the simple interest using the formula: S I = P × r × t = 400 × 0.06 × 3 = G H $72.00 .
Calculate the total amount by adding the simple interest to the principal amount: A = P + S I = 400 + 72 = G H $472.00 .
The interest earned is GH$72.00.
The total amount after 3 years is G H $472.00 .
Explanation
Understanding the Problem We are given a principal amount of GH$400.00 that is saved for 3 years at an interest rate of 6%. We need to find the simple interest earned and the total amount after 3 years.
Calculating Simple Interest First, we calculate the simple interest (SI) using the formula: S I = P × r × t where:
P is the principal amount (GH$400.00)
r is the interest rate (6% or 0.06)
t is the time period (3 years)
Simple Interest Calculation Substituting the given values into the formula, we get: S I = 400 × 0.06 × 3 = 72 So, the simple interest earned is GH$72.00.
Calculating Total Amount Next, we calculate the total amount (A) after 3 years by adding the simple interest to the principal amount using the formula: A = P + S I
Total Amount Calculation Substituting the values, we get: A = 400 + 72 = 472 Therefore, the total amount after 3 years is GH$472.00.
Final Answer The interest earned is GH$72.00, and the total amount after 3 years is GH$472.00.
Examples
Understanding simple interest is crucial in personal finance. For instance, if you deposit money in a savings account, the bank pays you interest. Similarly, when you borrow money, you pay interest to the lender. Knowing how to calculate simple interest helps you estimate earnings on savings or the cost of borrowing, enabling informed financial decisions.
