How much money must you deposit in a simple interest account to earn $500 in 5 years at 4% annual interest?

Question

asked Jun 4, 2023 37.8k views

1 Answer

Torrean · Answer 1 · 2023-06-09T15:13:09+0000

Begin by writing the interest formula:

Interest = Principal × Rate × Time or I = Prt

Filling in the formula, we have:

500 = (P)(.04)(5)

~simplify right side

500 = 0.2P

~solve

2500 = P

This means our principal or the amount deposited is $2500.