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| Math Central | Quandaries & Queries |
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Question from Lee, a student: If a bank pays 3% simple interest anually on savings, and you did not take any money out of your account, how much money would you have deposited to earn $45 in interest |
Hi Lee.
The amount of simple interest you earn annually equals the interest rate times the principal (the initial deposit).
So let P = the principal. Then $45 = 3% x P.
Three percent is 3/100 = 0.03, so this means
45 = 0.03P
Now we "solve for P" by dividing both sides of the equation by 0.03:
45 / 0.03 = 0.03P / 0.03
$1500 = P. So the initial deposit was $1500.
Problem solved.
Stephen La Rocque.
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