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 StartFraction I Over r t EndFraction.. Using this formula, what is the amount of money, P, that will generate $20 at a 5% interest rate over 5 years?

$

Answer 1

Use P = I / (r t). Here I = 20, r = 0.05, t = 5:

P = 20 / (0.05 × 5) = 20 / 0.25 = 80.

So $80.