What is the simple interest earned on $1,200 at 4% interest rate for 2 years?

What is the simple interest earned on $1,200 at 4% interest rate for 2 years?

• A. $48
• B. $96
• C. $24
• D. $120

Answer: (B)

This question uses the simple interest formula I = P × r × t. Convert the percentage to a decimal: r = 0.04. With P = 1200 and t = 2, the interest is I = 1200 × 0.04 × 2 = 1200 × 0.08 = 96. So the simple interest earned is $96. Quick check: 4% of 1200 is 48 per year, and for 2 years that’s 96.

This question uses the simple interest formula I = P × r × t. Convert the percentage to a decimal: r = 0.04. With P = 1200 and t = 2, the interest is I = 1200 × 0.04 × 2 = 1200 × 0.08 = 96. So the simple interest earned is $96. Quick check: 4% of 1200 is 48 per year, and for 2 years that’s 96.