Question

Edwin deposited money into a savings account that pays a simple annual interestrate of 1.2%. He earned $27 in interest after 3 years. How much did he deposit?Round answer to the hundredths place. If answer does not have a hundredths placethen include zeros so it does.

Answer 1

Solution

Given

r = 1.2% = 0.012

A = $27

t = 3 years

Since Amount(A) = Principal(P) + (Principal(P) × Rate(r) × Time(t))

$\begin{gathered} A=P+PRT \\ \\ \Rightarrow A=P(1+RT) \end{gathered}$

=> 27 = P(1 + r × t)

$\begin{gathered} \Rightarrow27=P(1+r\times t) \\ \\ \Rightarrow P=\frac{27}{1+(r\times t)} \\ \\ \Rightarrow P=\frac{27}{1+(0.012\times3)}\approx\ 26.06 \end{gathered}$

Hence, the principal is $26.06