How much money should be invested at 8% simple interest for 5 years in order to gain simple interest of $160.

Question

How much money should be invested at 8% simple interest for 5 years in order to gain simple interest of $160.

Answer 1

Simple interest can be found by multiplying the amount invested times the interest rate times the length of time it is invested.

 

I = P r t

 

In your problem, you have I = 160, r = 0.08 and t = 5. You should be able to solve this for P now.

 

160 = P * 0.08 * 5

Answer 2

simple interest can be described by the following formula

 

I = P*r*t   where t= time in years; r = interest rate; P = principal; and I = interest

 

If total interest gained after 5 years is $160 when at 8% simple interest;  let t=5, let I = $160, let r = 0.08, solve for P

 

I = P*r*t

$160 = P*(0.08)*(5)

$160 /[0.08*5] = P = $160/0.4 = $400