A man invested N5,000 for 9 months at 4%. What is the simple interest?

Analysis

To find the simple interest, we need to use the standard simple interest formula. We are given the principal, the rate, and the time period.

Concept

The formula for Simple Interest ($I$) is:

Where:

• $P$ (Principal) = The amount invested = N5,000
• $R$ (Rate) = The interest rate per annum = 4%
• $T$ (Time) = The duration of the investment in years. Since the time is given in months, we must convert it to years by dividing by 12 (because there are 12 months in a year).

Step-by-Step Solution

1. Convert the time to years: $T = \frac{9 \text{ months}}{12 \text{ months/year}} = \frac{3}{4} \text{ year}$ (or 0.75 years).

2. Apply the formula: $I = \frac{5000 \times 4 \times (\frac{3}{4})}{100}$

3. Simplify the calculation: First, multiply the principal by the rate: $5000 \times 4 = 20,000$

Next, multiply by the time ($T = 0.75$): $20,000 \times 0.75 = 15,000$

Finally, divide by 100: $I = \frac{15,000}{100} = 150$

The simple interest is N150.

Conclusion

Comparing our result to the options provided, the correct option is A.

Exam Tip

Always check the unit of time in interest questions! If the time is given in months, divide by 12; if it is given in days, divide by 365 (or 360, depending on the specific exam convention, though 365 is standard). Never plug the number of months directly into the formula as "T" without converting it to years first.