Question

What principal would you need to invest at a rate of 6.5% to earn $200 in 6 months?

A) $3080.77
B) $188.68
C) $211.32
D) $304.35

Answer 1

To determine the principal needed to earn $200 in 6 months at a 6.5% interest rate, use the formula for simple interest, leading to a principal of $6153.85.

Step-by-step explanation:

To find the principal required to earn $200 in 6 months at a rate of 6.5%, let's use the simple interest formula Interest = Principal × rate × time. We are given that the interest to be earned is $200, the annual rate is 6.5% (or 0.065), and the time is 0.5 years (since 6 months is half a year).

First, convert the annual interest rate to a decimal: 6.5% = 0.065. Then, plug in the values into the formula:

$200 = Principal × 0.065 × 0.5

Now, solve for Principal:

Principal = $200 / (0.065 × 0.5)

Principal = $200 / 0.0325

Principal = $6153.85

Therefore, the correct principal needed is $6153.85.