Question

Calculates the Principal that produced an interest of $650 at the rate of 4 % per annum in 150 days? Calculate using simple interest rate assumption?

Answer 1

$38,235.29

Explanation:

The first thing I'll do is figure out what the actual percentage is that we're working with. We're told that the rate is 4% per annum - that is the percentage increase we'd be working with if the money was invested for an entire year. But it wasn't. It was invested for 150 days. Which means our percentage is:

`.04xx150/365=.01bar6~~1.7%`

With that, we can now look at the interest and principal amounts.

Think of the calculation this way: If I had $100 in principal and it made 1.7% interest, I'd have gotten $1.70 in interest. And so looking at this question a different way, I could say that if I divided the amount of interest by the percentage, I'd get the principal:

`($1.70)/.017=$100`

We can do the same with our numbers:

`($650)/.017=$38,235.29`