Calculate the Amount of Simple Interest Earned

question 40

Multiple Choice

Calculate the amount of simple interest earned. $5,000 at 8% for 4 years

• A) $20,000
• B) $1,600
• C) $400
• D) $16,000
• E) $32,000

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds over a period, including loans, bonds, or credit lines.

Floating-rate Debt

A form of debt where the interest rate varies over time based on a benchmark interest rate or index.

Market Rate

The current interest rate or cost of borrowing in the market, applicable to loans, deposits, and securities.

Bond Interest Expense

The cost incurred by an issuer of bonds due to interest payments made to bondholders, typically recognized as an expense in the income statement.