Answer:
$3800
Step-by-step explanation:
When simple interest is added to the principal amount, the sum increases linearly with time. Essentially, you are asked for the y-intercept of a line that goes through the points (2, 6200) and (3, 7400). You can use the 2-point form of the equation of a line to find it:
y = (y2 -y1)/(x2 -x1)(x -x1) +y1
y = (7400 -6200)/(3 -2)(x -2) +6200 . . . . fill in given points
y = 1200(x -2) +6200 . . . . . . . . . simplify some
y = 1200x -2400 +6200 . . . . . . simplify more
y = 1200x +3800 . . . . . . . . . . . . . completely simplify
When the number of years (x) is zero, the amount is 3800. The principal is $3800.
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The account is earning $1200 per year on a principal of $3800. The interest rate is about 31.6%, an unusually high value.
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<em>Alternate solution</em>
You can recognize that the interest earned in one year is 7400 -6200 = 1200. Since this is simple interest, the amount of interest earned each year is the same, so in 3 years, the account has earned 3×$1200 = $3600 in interest. Then the original principal amount must be ...
$7400 -3600 = $3800 . . . . . principal amount
