Question

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 = . Using this formula, what is the amount of money, P, that will generate $20 at a 5% interest rate over 5 years?

Answer 1

P=A/(1+rt)
P = 20 / ( 1 + (0.05 × 5)) = 16
P = $ 16.00

The principal investment required to get
a total amount, principal plus interest, of $ 20.00
from simple interest
at a rate of 5% per year
for 5 years is $ 16.00.