Question

Donovan’s savings account earns 3% interest each year. Last year he earned $37.50 in interest.

How much money was in the account at the start of the year? Show your work.

Answer 1

Donovan had $1250.00 in his savings account at the start of the year to earn $37.50 at a 3% interest rate over that year.

Step-by-step explanation:

The question asks to find the original amount of money in Donovan's savings account that earned him $37.50 at a 3% interest rate over the course of a year. This is a problem involving simple interest. The formula for simple interest is I = PRT, where I is the interest earned, P is the principal amount (the initial amount of money), R is the interest rate per period, and T is the time period in years.

Using the information provided, we have I = $37.50, R = 3% or 0.03 as a decimal, and T = 1 year. Plugging these values into the formula, we get:

$37.50 = P × 0.03 × 1

To find P, the principal, we divide both sides of the equation by 0.03:

P = $37.50 / 0.03

P = $1250.00

Therefore, Donovan had $1250.00 in his account at the start of the year.