Question

Shen invested in a savings bond for 4 years and was paid simple interest at an annual rate of 5% the total interest that he earned was $60 how much did he invest

Answer 1

$300

Explanation:

Simple interest is based on the principal amount of a loan or deposit, whereas compound interest is based on the principal amount and the interest that accumulates on it in every period.

Simple Interest = P x r x n

where P = Principal amount, r = Annual interest rate, n = Term of loan, in years​

5% = 5 ÷ 100 = 0.05 so r = 0.05

Therefore,

Simple Interest = P x r x n:

60 = P x 0.05 x 4

60 = 0.2P

P = 60 ÷ 0.2 = 300

So the initial investment was $300.