Question

How much would Adam have to deposit in a savings account to earn $100 in interest over 4 years at a 5% simple annual interest rate?

Answer 1

100 = P * 0.05 * 4

100 = P * 0.2

100/0.2 = P

500 = P

Answer 2

Answer: $500

Explanation:

The formula to calculate the simple interest is given by :-

`I=Prt` , where P is the principal amount, r is the rate of interest ( in decimal ) and t is the time period ( in years).

Given : I= $100 ; t= 4 years ; r= 5%=0.05

Substitute all the values in the above formula , we get

`100=P(0.05)(4)\\\\\Rightarrow\ P=(100)/((0.05)(4))\\\\=(100)/(0.2)=(1000)/(2)=500`

Hence, Adam have to deposit $500.