A Person Earns $593 In Simple Interest Over 14 Years At An Annual Interest Rate Of 4%. What Was The Principal Amount Invested?Round Your Answer To The Nearest Cent (hundredths Place).
What is Simple Interest?
Simple interest is a type of interest calculated on the initial principal amount invested. It is calculated as a percentage of the principal amount and is paid over a specific period of time. The formula for calculating simple interest is:
Simple Interest Formula
I = PRT
Where:
- I = Simple Interest
- P = Principal Amount
- R = Annual Interest Rate (in decimal form)
- T = Time (in years)
Calculating Principal Amount
In this problem, we are given the following information:
- Simple Interest (I) = $593
- Annual Interest Rate (R) = 4% = 0.04
- Time (T) = 14 years
We need to calculate the principal amount (P) invested.
Using the Simple Interest Formula to Calculate Principal Amount
We can rearrange the simple interest formula to solve for the principal amount (P):
P = I / (RT)
Substituting the given values, we get:
P = 593 / (0.04 * 14)
P = 593 / 0.56
P = 1060.36
Rounding the Answer to the Nearest Cent
Rounding the answer to the nearest cent (hundredths place), we get:
P = $1060.36
Therefore, the principal amount invested was $1060.36.
Example Use Case
This problem can be used to demonstrate the concept of simple interest and how it can be calculated. It can also be used to teach students how to use the simple interest formula to solve for the principal amount invested.
Real-World Application
Understanding simple interest and how to calculate the principal amount invested is important in real-world applications such as:
- Calculating interest on loans and credit cards
- Determining the return on investment (ROI) for investments
- Understanding the impact of interest rates on savings accounts
Conclusion
In this article, we discussed the concept of simple interest and how to calculate the principal amount invested using the simple interest formula. We used a real-world example to demonstrate how to apply the formula and calculate the principal amount invested. Understanding simple interest and how to calculate the principal amount invested is important in real-world applications and can help individuals make informed financial decisions.
Additional Resources
For more information on simple interest and how to calculate the principal amount invested, check out the following resources:
- Khan Academy: Simple Interest
- Mathway: Simple Interest Calculator
- Investopedia: Simple Interest Formula
A Person Earns $593 in Simple Interest over 14 Years at an Annual Interest Rate of 4%. What Was the Principal Amount Invested? Q&A =====================================================================================================================
Q: What is simple interest?
A: Simple interest is a type of interest calculated on the initial principal amount invested. It is calculated as a percentage of the principal amount and is paid over a specific period of time.
Q: What is the formula for calculating simple interest?
A: The formula for calculating simple interest is:
I = PRT
Where:
- I = Simple Interest
- P = Principal Amount
- R = Annual Interest Rate (in decimal form)
- T = Time (in years)
Q: How do I calculate the principal amount invested using the simple interest formula?
A: To calculate the principal amount invested, you can rearrange the simple interest formula to solve for the principal amount (P):
P = I / (RT)
Q: What if I don't know the principal amount invested, but I know the simple interest earned, annual interest rate, and time period?
A: In that case, you can use the simple interest formula to calculate the principal amount invested. For example, if you know the simple interest earned is $593, the annual interest rate is 4% (0.04), and the time period is 14 years, you can plug in these values to calculate the principal amount invested.
Q: How do I round the answer to the nearest cent?
A: To round the answer to the nearest cent, you can use a calculator or round the answer manually by looking at the hundredths place. For example, if the answer is $1060.36, you can round it to $1060.36.
Q: What is the principal amount invested in this problem?
A: Using the simple interest formula, we can calculate the principal amount invested as follows:
P = 593 / (0.04 * 14)
P = 593 / 0.56
P = 1060.36
Therefore, the principal amount invested is $1060.36.
Q: What are some real-world applications of simple interest?
A: Understanding simple interest and how to calculate the principal amount invested is important in real-world applications such as:
- Calculating interest on loans and credit cards
- Determining the return on investment (ROI) for investments
- Understanding the impact of interest rates on savings accounts
Q: Where can I learn more about simple interest and how to calculate the principal amount invested?
A: For more information on simple interest and how to calculate the principal amount invested, check out the following resources:
- Khan Academy: Simple Interest
- Mathway: Simple Interest Calculator
- Investopedia: Simple Interest Formula
Q: Can I use the simple interest formula to calculate the principal amount invested for other types of interest, such as compound interest?
A: No, the simple interest formula is only used to calculate simple interest, which is a type of interest that is calculated on the initial principal amount invested. Compound interest, on the other hand, is a type of interest that is calculated on both the principal amount and any accrued interest.
Q: How do I know if I'm using the correct formula to calculate the principal amount invested?
A: To ensure that you're using the correct formula, make sure to use the simple interest formula (I = PRT) and plug in the correct values for the simple interest earned, annual interest rate, and time period. If you're unsure, you can always double-check your work or consult with a financial expert.