Donovan’s savings account earns 3% interest each year. Last year he earned $37.50 in interest.

How much money was in the account at the start of the year? Show your work.

1 answer

To find out how much money Donovan had in his savings account at the start of the year, we can use the formula for calculating interest:

\[ \text{Interest} = \text{Principal} \times \text{Rate} \]

Where:

  • Interest is the amount earned (which is $37.50 in this case),
  • Principal is the initial amount of money in the account (what we want to find),
  • Rate is the interest rate (3% or 0.03 in decimal form).

Since we know the interest earned and the interest rate, we can rearrange the formula to solve for the Principal:

\[ \text{Principal} = \frac{\text{Interest}}{\text{Rate}} \]

Now, we can plug in the values:

\[ \text{Principal} = \frac{37.50}{0.03} \]

Calculating that gives:

\[ \text{Principal} = 1250 \]

Therefore, the amount of money that was in Donovan’s account at the start of the year was $1250.