What is the interest of a problem that says $6125 at 7% per year for 2.5 years?
Simple Interest: `I=Prt`
Where I = interst, P = principal, r = rate, and t = time in years.
`I = (6125)(0.07)(2.5)`
`I = 1071.875 `
The interest earned from a principal of 6125 at a 7% rate for 2.5 years would be $1071.88.
Compound Interest: `I = P(1 + r/n)^(nt)`
I = interest, P = principal, r = rate, n = number of times interest is compounded per year, and t= number of years.
To solve, use the Simple Interest formula
I - Interest earned
P - Principal amount
r - rate of interest
t - period
So, plug-in the given values to the formula.
`I=6125 * 0.07 * 2.5`
Hence, the interest earned is `$1071.875` .