Question

Suppose you earn 3% on a $1,200 deposit for 5 years. Explain how the simple interest is affected if the rate is increased by 1%. What happened if the time is increased by 1 year?

Answer 1

$\bf ~~~~~~ \textit{Simple Interest Earned}\\\\ I = Prt\qquad \begin{cases} I=\textit{interest earned}\\ P=\textit{original amount deposited}\to& \ 1200\\ r=rate\to 3\%\to \frac{3}{100}\to &0.03\\ t=years\to &5 \end{cases} \\\\\\ I=1200(0.03)(5)\implies \boxed{I=180}\\\\ -------------------------------$

$\bf ~~~~~~ \textit{Simple Interest Earned increased by 1\%}\\\\ I = Prt\qquad \begin{cases} I=\textit{interest earned}\\ P=\textit{original amount deposited}\to& \ 1200\\ r=rate\to 4\%\to \frac{4}{100}\to &0.04\\ t=years\to &5 \end{cases} \\\\\\ I=1200(0.04)(5)\implies \boxed{I =240}\\\\ -------------------------------$

$\bf ~~~~~~ \textit{Simple Interest Earned increased by 1 year}\\\\ I = Prt\qquad \begin{cases} I=\textit{interest earned}\\ P=\textit{original amount deposited}\to& \ 1200\\ r=rate\to 3\%\to \frac{3}{100}\to &0.03\\ t=years\to &6 \end{cases} \\\\\\ I=1200(0.03)(6)\implies \boxed{I =216}$