5003 Praxis Practice Test Practice Question
The formula I = (Prt)/100 gives the simple interest earned, in dollars, for a deposit of P dollars earning simple interest at a rate of r percent for t years. Jackson invested $7,500.00 for a period of 2 years in a new account that earned simple interest at a rate of 2.5 percent. There were no other transactions in the account. What was the total amount of interest earned by the account for the 2-year period?
Correct Answer: C
Rationale: To find the simple interest earned, the formula I = (Prt)/100 is applied, where P is the principal amount, r is the interest rate, and t is the time in years.
Using the values provided:
P = $7,500,
r = 2.5,
t = 2.
Calculating gives:
I = (7500 * 2.5 * 2) / 100 = $375.
This confirms that $375 is the total interest earned.
Option A ($150) miscalculates the interest by using an incorrect time or rate.
Option B ($187.50) likely results from a miscalculation of the formula or incorrect values.
Option D ($750) represents the total principal instead of interest.
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