What is the amount of interest earned on a $407 investment at a 6% interest rate over seven years?
The amount of interest earned on a $407 investment at a 6% interest rate over seven years can be calculated using the formula for simple interest:
\[
\text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time}
\]
Where:
- Principal = $407
- Rate = 6% (0.06 as a decimal)
- Time = 7 years
Plugging in the values:
\[
\text{Interest} = $407 \times 0.06 \times 7 = $170.94
\]
So, the interest earned on a $407 investment at a 6% interest rate over seven years is $170.94.
Understanding Simple Interest Calculation
Principal: The principal amount is the initial amount of money invested or borrowed, in this case, $407.
Rate: The rate is the percentage of interest that is applied to the principal amount per period, in this case, 6% or 0.06 as a decimal.
Time: The time is the duration for which the money is invested or borrowed, in this case, 7 years.
Simple Interest Formula
The formula to calculate simple interest is:
\[
\text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time}
\]
Where:
- Interest is the amount of money earned or paid for the use of money (in this case, earned interest).
- Principal is the initial amount of money (in this case, $407).
- Rate is the interest rate per period (in this case, 6% or 0.06 as a decimal).
- Time is the duration for which the money is borrowed or invested (in this case, 7 years).
Calculating the Interest
Substituting the given values into the formula, we get:
\[
\text{Interest} = $407 \times 0.06 \times 7 = $170.94
\]
Therefore, the amount of interest earned on a $407 investment at a 6% interest rate over seven years is $170.94. This means that after seven years, the initial investment of $407 will have grown by $170.94 due to the interest earned.