Question

What is the amount invested in a bank for 78 days, and simple interest of 5.6 per cent per annum is charged, the total amount at the end of the period will be 849.3?

Select one:

a. 839.14

b. 839.26

c. 859.25

d. 9.95

Answer 1

Formula for simple interest can be used to compute principal of investment as:

A = P x (1+ r t)                                                                                                                          

P = A / (1+ r t)

A = Total accrued amount = $ 849.30

P = Principal of deposit

r = Rate of interest = 5.6 % or 0.056 p.a.

t = Time in year = 78/365

Substituting all the values and solving for P we get,

P = $ 849.30 / [1+ (0.056 x 78/365)]

= $ 849.30 / [1+ (0.056 x 0.213698630136986)]

= $ 849.30/ (1+ 0.01196712328767)

= $ 849.30/ 1.01196712328767

= $ 839.256513829 or $ 839.26

$ 839.26 needs to deposit to get the desired future amount.

Hence option “b. $ 839.26” is correct answer.