Answer:
Principal (amount invested) = $14,350
Step-by-step explanation:
Given the simple interest amount of $2,870 earned in 4 years at 5% interest rate:
In order to find the principal amount that was invested, we could use the simple interest formula and isolate the variable, P, algebraically.
I = P × r × t
where:
I = interest earned = $2,870
P = principal amount invested = ?
r = interest rate = 5% or 0.05
t = time = 4
Divide both sides by (r × t ) to isolate P :
[tex]\displaystyle\mathsf{\frac{I}{(r\:\times\:t)}\:=\:\frac{P\:\times\:r\:\times\:t}{(r\:\times\:t)}}[/tex]
[tex]\displaystyle\mathsf{P\:=\frac{I}{(r\:\times\:t)}}[/tex]
Substitute the given values into the formula for P:
[tex]\displaystyle\mathsf{P\:=\frac{I}{(r\:\times\:t)}\:=\:\frac{2870}{0.05\:\times\:4}}[/tex]
[tex]\displaystyle\mathsf{P\:=\frac{2870}{0.20}=14,350}[/tex]
Therefore, the principal amount invested is $14,350.
