How much money should be deposited in a bank for half a year at an interest rate of 4% p.a. in order to gain $5 000 simple interest?
Question
How much money should be deposited in a bank for half a year at an interest rate of 4% p.a. in order to gain $5 000 simple interest?
Solution
To solve this problem, we need to use the formula for simple interest which is:
I = PRT
where: I = Interest P = Principal amount (the initial amount of money) R = Rate of interest T = Time the money is invested for
We know the Interest (I) is $5000, the Rate of interest (R) is 4% per annum (or 0.04 when expressed as a decimal), and the Time (T) is half a year (or 0.5 when expressed as a decimal). We want to find the Principal amount (P).
Rearranging the formula to solve for P gives us:
P = I / (RT)
Substituting the known values into the formula gives us:
P = 5000 / (0.04 * 0.5)
Calculating the above expression gives us the Principal amount (P) that should be deposited in the bank.
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