Question

After 10 years, Hamid's account earned $900 in interest. If the interest rate (in decimal form) is 0.08, how much did Hamid initially invest? Without substitution, solve the formula chosen in the previous step for the unknown variable in terms of the known variable(s).

Answer 1

Hamid initially invested $1,125.

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E is the amount of interest earned, P is the principal(the initial amount of money), I is the interest rate(yearly, as a decimal) and t is the time.

After 10 years, Hamid's account earned $900 in interest.

This means that
`t = 10, E = 900`

Interest rate of 0.08:

This means that
`I = 0.08`

How much did Hamid initially invest?

We have to find P. So

`E = P*I*t`

`900 = P*0.08*10`

`P = (900)/(0.8)`

`P = 1125`

Hamid initially invested $1,125.