Question

Javier's parents set an amount of money aside when he was born. They earned 4.5% simple interest on that money each year. When Javier was 15, the account had a total of $1012.50 interest paid on it. How much did Javier's parents set aside when he was born

Answer 1

Javier's parents set aside $1500 when he was born

Explanation:

This is a simple interest problem.

The simple interest formula is given by:

`E = P*I*t`

In which E is the 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.

In this question, we have that:

`E = 1012.50, t = 15, I = 0.045`

We have to find P. So

`E = P*I*t`

`1012.50 = P*15*0.045`

`P = (1012.50)/(15*0.045)`

`P = 1500`

Javier's parents set aside $1500 when he was born