Calculate Simple Interest to Determine Future Amount

What is the calculation of simple interest for an investment of $3000 at a rate of 6% over 20 years?

A) $3600

B) $4200

C) $4800

D) $5400

Answer:

The calculation of simple interest for a principal of $3000 at a rate of 6% over 20 years yields an interest of $3600. This is added to the original principal, giving a total of $6600 after 20 years.

The concept of simple interest involves calculating interest based solely on the initial principal amount. In this scenario, you have invested $3000 in an account that pays a simple interest rate of 6% for 20 years. To calculate the total interest earned, you can use the formula for simple interest: Interest = Principal * Rate * Time. In this case, Principal (P) = $3000 Rate (r) = 0.06 (6% as a decimal) Time (t) = 20 years Plugging these values into the formula, Interest = $3000 * 0.06 * 20 = $3600. This means that after 20 years, you will earn $3600 in interest. When you add this interest to the initial principal, Total Amount = $3000 + $3600 = $6600. Therefore, at the end of the 20-year period, you will have $6600 in total in your account. It's important to note that simple interest is calculated based only on the original principal amount and does not take into account any additional contributions or fluctuations in the interest rate over time.