Calculate Simple Interest How Much Interest On K2000 At 8% For 3 Years
Understanding Simple Interest
Before we dive into calculating the interest earned on a K2,000 deposit, it's crucial to grasp the concept of simple interest. Simple interest is a straightforward method of calculating interest where the interest earned is based solely on the principal amount, the interest rate, and the time period. This contrasts with compound interest, where interest is earned not only on the principal but also on the accumulated interest from previous periods. Understanding simple interest is fundamental for anyone looking to make informed financial decisions, whether it's for personal savings, investments, or loans. The formula for simple interest is quite straightforward, making it easy to calculate the interest earned over a specific period. It's calculated using the formula: Simple Interest (SI) = P × R × T, where 'P' represents the principal amount (the initial deposit), 'R' represents the annual interest rate (expressed as a decimal), and 'T' represents the time period in years. This simple yet powerful formula allows us to determine the interest earned on any principal amount at a given interest rate over a specified period. When dealing with financial matters, especially when comparing different investment options or loan terms, understanding how simple interest works is invaluable. It provides a clear picture of the actual earnings or costs involved, enabling individuals to make well-informed choices. In the context of deposits, simple interest helps you understand how much your initial investment will grow over time. For loans, it clarifies the total interest you will need to pay back, helping you assess the affordability of the loan. By mastering the principles of simple interest, you gain a solid foundation for making sound financial decisions and managing your money effectively. The concept of simple interest is not just limited to textbooks and calculations; it's a practical tool that empowers you to take control of your financial future.
Problem Breakdown: K2,000 Deposit at 8% for 3 Years
To effectively solve this problem, let's break it down into its core components. We are given a principal amount (P) of K2,000, an annual interest rate (R) of 8%, and a time period (T) of 3 years. The objective is to calculate the total interest earned on this deposit using the simple interest method. Understanding each component is essential for applying the simple interest formula correctly. The principal amount, K2,000, is the initial sum of money deposited. This is the base upon which the interest will be calculated. The annual interest rate, 8%, is the percentage of the principal that will be earned as interest each year. To use this in the formula, we need to convert it to a decimal by dividing by 100, resulting in 0.08. The time period, 3 years, is the duration for which the money will be deposited. This is a crucial factor as it directly impacts the total interest earned – the longer the time period, the higher the interest. Now that we have clearly identified each component, we can confidently apply the simple interest formula. It's important to note that in real-world financial scenarios, understanding the terms of a deposit or loan is crucial. Knowing the principal, interest rate, and time period allows you to accurately calculate the potential earnings or costs involved. This problem-solving approach not only helps in answering mathematical questions but also equips you with the skills to make informed financial decisions in your daily life. By breaking down complex problems into smaller, manageable parts, we can better understand the underlying concepts and apply the correct formulas to arrive at the solution. This step-by-step approach is a valuable skill that can be applied to various problem-solving situations, both in mathematics and in real-world scenarios.
Applying the Simple Interest Formula
Now that we have identified the principal (P = K2,000), the annual interest rate (R = 8% or 0.08), and the time period (T = 3 years), we can apply the simple interest formula: SI = P × R × T. This formula is the key to calculating the total interest earned on the deposit. Plugging in the values, we get: SI = K2,000 × 0.08 × 3. This equation represents the core calculation we need to perform to find the answer. Let's break down the calculation step by step to ensure clarity. First, we multiply the principal amount (K2,000) by the annual interest rate (0.08): K2,000 × 0.08 = K160. This result, K160, represents the interest earned in one year. Next, we multiply the interest earned in one year (K160) by the time period (3 years): K160 × 3 = K480. This final result, K480, represents the total simple interest earned over the entire 3-year period. Therefore, the simple interest earned on a deposit of K2,000 at an interest rate of 8% per annum for 3 years is K480. This calculation demonstrates the power of the simple interest formula in determining the earnings on a deposit. By understanding and applying this formula correctly, you can easily calculate the interest earned on various investments or the interest payable on loans. The simplicity of the formula makes it a valuable tool for financial planning and decision-making. In summary, the application of the simple interest formula involves substituting the given values, performing the multiplication, and arriving at the total interest earned. This process is straightforward and can be easily applied to various scenarios involving simple interest calculations.
Detailed Calculation Steps
To ensure a clear understanding of the calculation process, let's walk through the steps in detail. We begin with the simple interest formula: SI = P × R × T. We have already identified the values for each variable: P = K2,000, R = 0.08 (8% as a decimal), and T = 3 years. The first step is to substitute these values into the formula: SI = K2,000 × 0.08 × 3. Next, we perform the first multiplication: K2,000 × 0.08. This can be calculated as follows: 2000 multiplied by 0.08. To simplify this, we can think of 0.08 as 8/100. So, we are essentially calculating (2000 × 8) / 100. 2000 multiplied by 8 is 16000. Then, dividing 16000 by 100 gives us 160. Therefore, K2,000 × 0.08 = K160. This result represents the interest earned in one year. The next step is to multiply the interest earned in one year (K160) by the time period (3 years): K160 × 3. This is a straightforward multiplication: 160 multiplied by 3. We can calculate this as (100 × 3) + (60 × 3) = 300 + 180 = 480. Therefore, K160 × 3 = K480. This final result, K480, is the total simple interest earned over the 3-year period. Each step in this calculation is crucial for arriving at the correct answer. By breaking down the multiplication into smaller, manageable steps, we can avoid errors and ensure accuracy. This detailed approach is particularly helpful when dealing with more complex calculations or when explaining the process to someone else. In summary, the calculation involves substituting the values into the formula, performing the multiplications step by step, and arriving at the total simple interest earned. This process highlights the importance of accuracy and attention to detail when performing financial calculations.
Identifying the Correct Answer
After performing the calculation, we found that the simple interest earned on a deposit of K2,000 at an interest rate of 8% per annum for 3 years is K480. Now, we need to identify the correct answer from the given options. The options provided are:
A. K48.00 B. K480.00 C. K4800.00 D. K4.80
Comparing our calculated result (K480) with the options, we can clearly see that option B, K480.00, matches our result. Therefore, option B is the correct answer. It's important to carefully compare the calculated result with the options provided to avoid making mistakes. Sometimes, the options may be very similar, and a slight error in calculation can lead to selecting the wrong answer. In this case, our calculation was straightforward, and the correct answer was easily identifiable. However, in more complex problems, it's always a good practice to double-check your calculations and ensure that you have selected the correct option. The process of identifying the correct answer involves comparing the calculated result with the given options and selecting the one that matches. This step is crucial for ensuring that you have answered the question correctly. In summary, by carefully comparing our calculated result (K480) with the given options, we have confidently identified option B (K480.00) as the correct answer. This final step reinforces the importance of accuracy and attention to detail in problem-solving.
Conclusion: The Simple Interest Earned
In conclusion, after applying the simple interest formula and performing the necessary calculations, we have determined that the interest earned on a deposit of K2,000 at a simple interest rate of 8% per annum for 3 years is K480. This result was obtained by using the formula SI = P × R × T, where P is the principal amount (K2,000), R is the annual interest rate (0.08), and T is the time period (3 years). By substituting these values into the formula and performing the calculations, we arrived at the answer of K480. This problem highlights the practical application of simple interest calculations in real-world financial scenarios. Understanding how to calculate simple interest is essential for making informed decisions about savings, investments, and loans. The simple interest formula provides a straightforward method for determining the interest earned or paid over a specific period. It's a valuable tool for anyone looking to manage their finances effectively. By mastering the principles of simple interest, you can confidently calculate the returns on your investments and the costs associated with borrowing money. The ability to perform these calculations empowers you to make sound financial choices and plan for your future. In summary, the calculation of simple interest is a fundamental skill in personal finance, and this problem demonstrates the step-by-step process involved in arriving at the correct answer. The interest earned on the K2,000 deposit is K480, which is a clear and concise result that can be easily understood and applied to similar scenarios.
