Question

You wan to put some money in a simple interest account. It pays 8% interest annually for 2 years. You would like to earn $500 in interest. How much money do you need to put in?

Answer 1

Answer: $3125

Step-by-step explanation: The simple interest formula is SI = (PRT)/100. SI stands for simple interest, P stands for principal amount (the amount of money you put into the bank in the first place), R stands for rate of simple interest, and T stands for the time the money is in the bank account. We need to figure out what P is, the amount of money that was invested. So first, rearrange the formula from SI = (PRT)/100 to P = (100 x SI)/RT. In this equation, the rate of simple interest is 8% annually for 2 years. Therefore, once you plug in those numbers, the equation is P = (100 x 500)/(8 x 2). Once you calculate this, 50000/16, the answer you get is P = $3125. Therefore, the amount of money you need to put in is $3125.