Calculate the principal, using the information given.

Question

A bank deposit paying simple interest at the rate of 8% per year grew to a sum of $1300 in 6 months. Find the principal.

Answer 1

The formula for simple interest is I = P*R*T where 

 

I = Interest

P = Principal

R = Rate as a decimal  (= 0.08) 

T = Time  (= 6 months = 1/2 year) 

 

The final sum was $1300 which includes both principal and interest so 

 

1300 = P + I = P + P*R*T = P*(1 + R*T) 

 

P*(1 + (0.08)*(1/2)) = 1300

P*(1.04) = 1300

P = 1300 / 1.04 = $1250 was the principal 

 

Check:  I = 1250*(0.08)*(1/2) = 50, 1250 + 50 = 1300