SOLUTION: A certain bank pays 12 1/2% (Fraction) per annum simple interest. How much money must a man have in the bank if he will receive $650 interest in 2 years?

Question 1091200: A certain bank pays 12 1/2% (Fraction) per annum simple interest. How much money must a man have in the bank if he will receive $650 interest in 2 years?
Answer by EMStelley(208) (Show Source): You can put this solution on YOUR website!
The formula for simple interest is

where A is the final amount, P is the principal (initial) amount, r is the rate in decimal form, and t is the number of years.
This question is a little different than the norm, in the sense that we are not giving the principal or final amount, but rather a way to connect the two. We want to have made $650 after 2 years. So if we put P dollars in, we want to receive (P + 650) at the end of 2 years. So for us, A = P + 650. Our rate in decimal form is 0.125 and our t is 2. So let's set that equation up.

Subtracting P from both sides, we get

Thus, P = 2600.
So if the man wants to make $650 after 2 years, he needs to put $2600 in the bank initially.
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