Multiple choice

Smith invested $ $5000$ for two years. For the first year, the rate of interest was \$7\%$ and the second year it was \$8.5\%$. How much interest did he earn at the end of the two year period?

  1. $ $804.75$
  2. $ $604.54$
  3. $ $304.54$

  4. None of these
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A Correct answer
Explanation

Year 1 interest = 5000 * 0.07 = 350. Amount after year 1 = 5350. Year 2 interest = 5350 * 0.085 = 454.75. Total interest = 350 + 454.75 = 804.75.

AI explanation

The interest is calculated successively on the accumulated amount, where the first year interest is 5000 times 7 divided by 100, equaling 350. The new principal for the second year is 5350, and the second year interest is 5350 times 8.5 divided by 100, equaling 454.75. The total interest earned over the two years is 350 plus 454.75, resulting in $804.75.

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