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?

Question

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Answer 1

To find the amount of money, P, we can plug in the values into the formula:

P = I / (rt)
P = $20 / (0.05 * 5)
P = $20 / 0.25
P = $80

Therefore, the amount of money, P, that will generate $20 at a 5% interest rate over 5 years is $80.