Question

How much principal must be invested to earn $20 and four years and an interest rate of 5%

Answer 1

Explanation:

We can use the formula for simple interest to calculate the principal amount that must be invested to earn $20 over four years at an interest rate of 5%:

I = P × r × t

where:

I = interest earned = $20

P = principal amount

r = interest rate per year = 5% = 0.05

t = time period in years = 4

Substituting the given values, we get:

$20 = P × 0.05 × 4

Simplifying and solving for P, we get:

P = $20 / (0.05 × 4) = $20 / 0.2 = $100

Therefore, a principal amount of $100 must be invested to earn $20 over four years at an interest rate of 5%