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A retired couple invested $12000 in bonds at a simple interest rate of 5%. At the end of one year, how much interest did they receive on their investment?

Sagot :

The simple interest formula is

[tex]A=P(1+rt)[/tex]

Where A is the final amount, P is the initial principal balance, r is the annual interest rate and t is the time in years.

In our case, (5%=0.05)

[tex]A=12000(1+0.05\cdot1)=12000\cdot(1.05)=12600[/tex]

In total, they received $12600 at the end of the year, and 12600-12000=$600 are purely interest.