Question

What principal would you need to invest at a rate of 7% to earn 500$ in 9 months?

Answer 1

Simple interest formula

`A=P(1+rt)`

where,

A=final amount

P=initial principal balance

r=annual interest rate

t=time (in years)

In this example,

A = $500

r = 7% = 0.07

t = 9 months

Replacing, we get:

`500=P(1+0.07\cdot9)`

therefore, the principal would be: P = $306.75

`P=(500)/(1+0.07\cdot9)=(500)/(1.63)=306.75`