Question

A savings account pays an annual rate of 2% simple interest. How much would you need to deposit to earn $100 interest by the end of the 2nd year?

Answer 1

You would need to deposit $2500

Explanation:

The simple Interest formula is given as;

`I=(P*R*T)/(100)`

Where I is the interest earned, P the principal amount deposited, R the simple interest rate and T the time.

The question requires us to determine the Principal given that;

I = 100

R = 2

T = 2

We make the Principal the subject of the formula;

`P=(100*I)/(R*T)\\\\P=(100*100)/(2*2)=2500`