Final answer:
To calculate the original principal from which $812.50 was accrued over 20 years at a simple interest rate of 1.25%, we use the simple interest formula.
After solving, we find that the original principal amount was $650.00.
Step-by-step explanation:
Finding the Original Principal with Simple Interest:
To determine the original amount of money, also known as the principal, that was invested to reach $812.50 over 20 years with a simple interest rate of 1.25%, we can use the simple interest formula:
I = P × r × t ( Where I is the interest earned, P is the principal amount, r is the interest rate per period, and t is the number of time periods).
We know the total amount (principal plus interest) after 20 years is $812.50, the simple interest rate is 1.25% (or 0.0125 when expressed as a decimal), and the time t is 20 years.
The total amount ‘A’ is the sum of the principal ‘P’ plus the interest ‘I’, which gives us A = P + I.
So, the equation becomes:
$812.50 = P + (P × 0.0125 × 20)
By simplifying and solving for P, we find:
$812.50 = P + 0.25P
$812.50 = 1.25P
P = $812.50 / 1.25
P = $650.00
Therefore, the original amount invested was $650.00.