Question

What is the simple interest of a loan for $1,000 with 5 percent interest after 3 years?

Answer 1

$150 ---- gradpoint

Answer 2

Simple interest produces interest only over the initial amount.

So every year the interest will be $1000 * 5 / 100 = $50.

That is, after 3 years 3 * $50 = $ 150.

Simple interest does not take into account the reduction of the principal but calculates the interest over the same initial amount, in this case $1000.

So, the answer is $150, which is the result of $50 times 3.