Question

Use the simple interest formula to determine the missing value.

p = ? r = 6% t = 3 months i= 21$

Answer 1

p = 1,400

Explanation:

Simple Interest Formula:

In the simple interest rate formula, each year the same amount of interest is applied, as it's based off the initial amount invested and the interest rate.

`I=P*r*t`

Where "r" is the interest rate, "t" is time, and "p" is the principle amount, or initial amount invested.

We're given the following values:

• r = 6% = 0.06
• t = 3 months
• i = 21

Now the only thing is generally speaking, interest is applied annually rather than monthly. So we would need to convert the 3 months into years, which we can do by dividing by 12, giving us: 0.25 years

So we actually have: t = 0.25 years

Now from here we can plug in known values, and leave anything we don't know alone. So we start with our initial formula of:

`I=P*r*t`

Now from here we plug in i = 21, t = 0.25, r = 0.06 and leave "P" as "P"

`21=P*0.25*0.06`

Now let's simplify the multiplication on the right side:

`21 = 0.015P`

Divide both sides by 0.015:

`1,400=P`

And now we have our missing value!