To determine the interest earned after 1 year in a savings account, we use the simple interest formula. The formula for simple interest is:
[tex]\[ \text{Interest} = P \times r \times t \][/tex]
where:
- [tex]\( P \)[/tex] is the principal amount (initial investment)
- [tex]\( r \)[/tex] is the rate of interest per year (expressed as a decimal)
- [tex]\( t \)[/tex] is the time the money is invested for (in years)
Given:
- Principal [tex]\( P = \$ 125 \)[/tex]
- Rate [tex]\( r = 4\% = \frac{4}{100} = 0.04 \)[/tex]
- Time [tex]\( t = 1 \)[/tex] year
Now, substituting the given values into the formula:
[tex]\[ \text{Interest} = 125 \times 0.04 \times 1 \][/tex]
Multiplying these values together:
[tex]\[ \text{Interest} = 125 \times 0.04 = 5 \][/tex]
Therefore, the interest earned after 1 year is:
[tex]\[ \text{Interest} = \$ 5.00 \][/tex]
So, the interest earned after 1 year in a savings account with an initial investment of \[tex]$125 and a 4% simple interest rate is \$[/tex]5.00.
