Question

Tahmar knows the formula for simple interest is I = Prt, where I represents the simple interest on an amount of money, P, for t years at r rate. She transforms the equation to isolate P : P = . Using this formula, what is the amount of money, P, that will generate $20 at a 5% interest rate over 5 years?

Answer 1

Answer: The amount of money that will generate $20 interest is $80.

If you solve the simple interest formula for P, you have P = I/(RT)

Now, let's plug in the values we know and solve for P.

P = 20/(0.05x5)
P = 20/0.25
P = 80