How do you calculate the interest earned on $1,000 at 5% interest for 3 years?

To calculate the interest earned on an amount using simple interest, the formula is:

[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} ]

Where:

• The principal is the initial amount of money (in this case, $1,000),

• The rate is the annual interest rate (here, 5% or 0.05),

• The time is the number of years the money is invested or borrowed (3 years in this example).

Plugging the values into the formula:

[

\text{Interest} = 1000 \times 0.05 \times 3

]

Calculating this:

1. Calculate (1000 \times 0.05), which equals $50.

2. Next, multiply $50 by 3, resulting in $150.

Thus, the total interest earned on $1,000 at a 5% interest rate for 3 years is $150. This aligns with the calculation for simple interest under these specific conditions, where the principal does not change over time. Keeping the principal constant and applying the same rate each year ensures that the interest accumulated can be easily calculated through straightforward multiplication.