Let's start by looking at the second row of the given table!
Principal
Annual Interest Rate
Time
Simple Interest
$12 000
4.25 %
5 years
$2550
6.5 %
18 months
$828.75
We want to calculate the principal. We can do so using the simple interest formula that tells us that the simple interest I is the product of the principal P, annual interest rate (in decimal form) r, and time (in years) t.
I=Prt
Here, the simple interest I is 828.75 dollars and the time t is 18 months. First, we can convert the time t from months to years. We can do using the conversion factor 1year12months.
The time t is equal to 1.5 year. We also know that the interest rate of 6.5 % can be written as 0.065. Now, we can substitute these values into the formula.
