Question

In 12 years, a bond with a 6.35% annual rate earned $7620 as simple interest. What was the principle amount of the bond

Answer 1

10000

Explanation:

If an amount of money, P, called the principal, is invested for a period of t years at an annual interest rate r, the amount of simple interest, I, earned is given by

I=PrtwhereIPrt=interest=principal=rate=time

The following information is given.

Irt=$7,620=0.0635=12 years

Substituting the given information into the simple interest formula and solving for P gives

7,6207,620=(P)(0.0635)(12)=0.762P

Dividing both sides by 0.762, we have

P=7,6200.762=10,000

Thus, the principal amount of the bond was $10,000.