A $2000 loan earns 6% simple interest for 1 year. What is the interest earned?

A $2000 loan earns 6% simple interest for 1 year. What is the interest earned?

• A. 60
• B. 120
• C. 150
• D. 240

Answer: (B)

This question uses simple interest, which is found by multiplying the principal by the interest rate and the time the money is borrowed. Here, the principal is 2000 dollars, the rate is 6% per year (0.06), and the time is 1 year. So the interest earned is 2000 × 0.06 × 1 = 120 dollars. In other words, 6% of 2000 is 120. The other numbers would come from different scenarios: 60 would be 3% of 2000 or a half-year at 6%; 150 would be 7.5% of 2000; 240 would be 12% of 2000 or 2 years at 6%.

This question uses simple interest, which is found by multiplying the principal by the interest rate and the time the money is borrowed. Here, the principal is 2000 dollars, the rate is 6% per year (0.06), and the time is 1 year. So the interest earned is 2000 × 0.06 × 1 = 120 dollars. In other words, 6% of 2000 is 120.

The other numbers would come from different scenarios: 60 would be 3% of 2000 or a half-year at 6%; 150 would be 7.5% of 2000; 240 would be 12% of 2000 or 2 years at 6%.