To solve for the Principal amount, we will use the formula:
P = I / rt
P = principal amount; which is the amount that we will be solving for.
I = the interest accrued within the allotted time frame. ($160)
r = the interest rate percentage. (1.6%)
t = the time frame that the money will accrue interest. (2 years)
Before we can plug in the numbers into our formula, we need to convert our percent into a decimal. To do this, move the decimal two places to the left. This will leave us with 0.016. We'll use that for "r".
Let's plug in the numbers:
P = 160 / (0.016) (2)
Multiply your bottom numbers together for 0.016 x 2 =0.032
P = 160 / 0.032
Divide now.
160 ÷ 0.032 = 5,000.
This tells us that, Bert will need to deposit $5,000 into the savings account to earn $160 within 2 years with a 1.6% interest rate.
