Question

In the following exercises, solve.

In $10$years, a bank account that paid $5.25\%$earned $\$18,375$
interest. What was the principal of the account?

Short answer

The principal of the account is $\$35,000$

Step-by-step solution

Step 1. Given Information

Interest, $I=\$18,375$

Rate, $r=5.25\%$

Time, $t=10$

Step 2. Simple interest formula

Simple interest,$I=Prt$

Substitute the known values,

$$\begin{gathered} 18,375=P(0.0525)10 \\ 18,375=0.525P \end{gathered}$$

Step 3. Find P

Solve the equation for P,

$$\begin{gathered} P=\frac{18375}{0.525} \\ =35,000 \end{gathered}$$