If you deposit $1000 in a bank account paying 1.2% annual interest, how much interest will the deposits earn in 5 years if the bank computes the interest using simple interest?

$60

Step-by-step explanation:

You are going to want to use the simple interest formula for this. The one below is modified for solving the interest earned.

P = initial balance

r = annual interest rate

t = time

First, change 1.2% into its decimal form:

1.2% -> -> 0.012

Next, plug the values into the equation:

The interest earned is $60.

for certain loans like mortgage loans, lenders scrutinize your debt to income ratio when you are applying for credit because it them evaluate your ability to repay your debts.