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A principal of 2000 dollars earns 6 percent simple interest for 3 years. How much interest is earned?
AIt is 360 dollars
BIt is 120 dollars
CIt is 180 dollars
DIt is 600 dollars
Answer & Solution
Correct answer: A. It is 360 dollars
1. Simple interest is found from I equal to P times r times t.
2. The principal P is 2000 dollars and the rate r as a decimal is 0.06.
3. The time t is 3 years, so I is 2000 times 0.06 times 3.
4. That gives 360 dollars.
5. Answering 120 dollars finds one year of interest and forgets to multiply by 3.
_Source: OpenStax Intermediate Algebra (CC BY 4.0), Ch 2 "Solving Linear Equations", section 2.2 Use a Problem Solving Strategy_