To calculate the initial amount of money needed to earn a specific amount of simple interest, use the formula P = A / (1 + rt). The initial amount needed in this case is approximately $10,034.41.
To calculate the initial amount of money needed to earn a specific amount of simple interest, use the formula:
P = A / (1 + rt)
Where:
- P is the principal amount (initial investment)
- A is the desired amount (in this case, $23,625.00)
- r is the interest rate per period (9.45%)
- t is the number of periods (10 years)
Substituting the values into the formula, we get:
P = 23625 / (1 + 0.0945 * 10)
P ≈ $10,034.41