If the simple interest on a sum of money is $300 in 3 years at a rate of 5% per

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Question: If the simple interest on a sum of money is $300 in 3 years at a rate of 5% per annum, what is the principal?

Options:

Correct Answer: $2000

Solution:

Principal = Simple Interest / (Rate * Time) = 300 / (0.05 * 3) = 300 / 0.15 = $2000.

If the simple interest on a sum of money is $300 in 3 years at a rate of 5% per annum, what is the principal?

If the simple interest on a sum of money is $300 in 3 years at a rate of 5% per annum, what is the principal?

Step 1: Understand the formula for simple interest, which is: Simple Interest = Principal × Rate × Time.
Step 2: Identify the values given in the question: Simple Interest = $300, Rate = 5% (which is 0.05 in decimal), and Time = 3 years.
Step 3: Rearrange the formula to find the Principal: Principal = Simple Interest / (Rate × Time).
Step 4: Substitute the known values into the formula: Principal = 300 / (0.05 × 3).
Step 5: Calculate the denominator: 0.05 × 3 = 0.15.
Step 6: Now divide the Simple Interest by the result from Step 5: Principal = 300 / 0.15.
Step 7: Perform the division: 300 divided by 0.15 equals 2000.
Step 8: Conclude that the Principal amount is $2000.

Simple Interest – The interest calculated on the principal amount over a specific period at a given rate.
Principal Calculation – Determining the original sum of money based on the interest earned, rate, and time.