HESI A2 Math Related

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If an investment earns 5% interest annually, how much interest will it earn in 1 year on a principal of $1,000?

  • A. $40
  • B. $50
  • C. $60
  • D. $55
Correct Answer: B

Rationale: The correct answer is B: $50. To calculate the interest earned on an investment with a 5% interest rate on a principal of $1,000, you simply multiply the principal amount by the interest rate. 5% of $1,000 is $50. Therefore, the investment will earn $50 in interest in 1 year. Choice A, $40, is incorrect because it represents 4% interest instead of 5%. Choice C, $60, is incorrect because it overestimates the interest earned. Choice D, $55, is incorrect as it does not accurately reflect the 5% interest on the principal amount.