2. \( \$ 1200 \) at \( 7 \% \) for 5 years \( \begin{array}{lll}\text { A. } \$ 420 & \text { B. } \$ 240 & \text { C. } \$ 400\end{array} \)

To find the interest earned on \$1200 at a 7% annual interest rate over 5 years, you can use the simple interest formula: \( I = P \times r \times t \), where \( P \) is the principal amount, \( r \) is the rate (as a decimal), and \( t \) is the time in years. Plugging in the values: \( I = 1200 \times 0.07 \times 5 = 420 \). So, your interest earned is \$420, making the answer A! Interestingly, simple interest is a concept that dates back to ancient civilizations, with records showing that the Babylonians and Egyptians used similar methods for calculating interest on loans. The formula has withstood the test of time and remains a fundamental financial principle today! If you're calculating interest, a common mistake is forgetting to convert the percentage to a decimal (7% becomes 0.07). Always double-check your math, and don't overlook compounding options—if the interest compounds, the future value could be significantly higher. Remember to adjust your formula accordingly!