Question

Eric invested in a savings bond for 4 years and was paid simple interest at an annual rate of 4%. The total interest that he earned was $1120. How much did he invest?

Answer 1

$7000

Explanation:

For simple interest,

I = Prt,

where I = amount of interest earned

P = principal amount, the amount of the investment

r = annual interest rate (convert percent to decimal for calculations)

t = time (number of years)

I = Prt

We know I, r, and t, and we need to solve for P.

1120 = P × 4% × 4

Convert percent to decimal.

1120 = P × 0.04 × 4

Multiply on the right side.

1120 = 0.16P

Divide both sides by 0.16

7000 = P

Answer: $7000