Question

What principal would you need to invest at a rate of 4% to earn $500 in 6 months? Round your answer to the nearest cent.

Answer 1

From the information available, we have the following;

Rate = 4% (0.04)

Time = 0.5 (half a year/6 months)

Interest = 500

Principal = ???

Therefore, we would substitute these into the simple interest formula as shown below;

`\begin{gathered} I=P* R* T \\ \text{Make P the ubject of the equation;} \\ \text{Divide both sides by R x T and you'll have;} \\ (I)/(R* T)=(P* R* T)/(R* T) \\ (I)/(R* T)=P \\ (500)/(0.04*0.5)=P \\ (500)/(0.02)=P \\ P=25000 \end{gathered}`

ANSWER:

The principal to be invested therefore is $25,000