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 = P : P equals Start Fraction I Over r t End Fraction.. Using this formula, what is the amount of money, P, that will generate $20 at a 5% interest rate over 5 years?

Answer 1

P = $80

Explanation:

I = P*r*t

P = I/rt

Where,

simple interest, I = $20

Interest rate, r = 5%

Time, t = 5 years

P = I / rt

= 20 / 5% * 5

= 20 / 0.05 * 5

= 20 / 0.25

= 80

P = $80