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An investment earns 6% simple interest. What amount of principal is needed to have $3,000 after 5 years? Round your answer to the nearest cent.

A) $2,642
B) $2,830
C) $2,830.19
D) $2,642.86

User Varan
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1 Answer

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Final answer:

To determine the principal needed to have $3,000 after 5 years with a 6% simple interest rate, we use the formula for simple interest and solve for the principal. The calculation indicates that the principal should be $2,307.69 when rounded to the nearest cent, although this does not match any of the provided options, suggesting a possible error in the options or the calculation.

Step-by-step explanation:

To calculate the principal needed to reach a future value of $3,000 with simple interest, we use the formula for simple interest: Future Value = Principal + (Principal × interest rate × time). We're given that the future value is $3,000, the interest rate is 6% (or 0.06 as a decimal), and the time is 5 years. Setting up the equation, it looks like this:

$3,000 = Principal + (Principal × 0.06 × 5)

To find the Principal, we need to isolate it on one side of the equation. First, distribute the interest rate and time within the parenthesis:

$3,000 = Principal + (Principal × 0.3)

Combine like terms:

$3,000 = Principal × (1 + 0.3)

$3,000 = Principal × 1.3

Now, divide both sides by 1.3 to solve for the Principal:

Principal = $3,000 / 1.3

Principal = $2,307.69 (rounded to the nearest cent)

Since none of the options given match the correct calculation, the student might need to review the options or the calculation for potential errors.

User Kingfisher Phuoc
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