Question

Rich deposited money into a bank account that earned 2.5% simple interest each year. After 2 years, he had earned $14.65 in interest on the account. If no other money was deposited into or withdrawn from the account, how much was his initial deposit?

Answer 1

The formula for simple interest is
$I=Prt$
where I=interest earned, P=initial deposit, r=rate of increase, and t=time.

We have
$I=14.65$
$r=2.5\%=0.025$
$t=2$

Plug in:
$14.65=P(0.025)(2)$
Solve for $P$:
$14.65=0.05P$
$\rightarrow P=293$

So the initial deposit was $293.