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Answer:
You should invest $2000 at 5% simple interest in order to earn $100 interest in 12 months.
Step-by-step explanation:
Using the formula
where
I = Interest earned
P = The principal (let say in $)
r = The Interest Rate
t = time
Given that
- I = $100
- r = 5%
- t = 12 month = 1 year
- P = The principal amount needed to invest (let say in $)
Thus,
100 = P × 5% × 1
100 = P × 5/100 × 1
100 × 100 = P × 5
10000 = P × 5
P = 10000/5
= 2000 (let say in $)
Thus, you should invest $2000 at 5% simple interest in order to earn $100 interest in 12 months.