What sum of money will amount to D10,400 in 5 years at 6% simple interest?

Analyze the question: We want the principal (P) that grows to a total amount of D10,400 after 5 years at 6% simple interest. "Amount" means principal plus interest.

Concept:

• Simple interest: I = PRT/100
• Amount: A = P + I = P(1 + RT/100)

Solution:

A = P(1 + RT/100)

10,400 = P(1 + (6 × 5)/100)

10,400 = P(1 + 0.30)

10,400 = 1.3P

P = 10,400 ÷ 1.3 = 8,000

Check: Interest = (8,000 × 6 × 5)/100 = D2,400 Amount = 8,000 + 2,400 = D10,400 ✔

Answer: A. D8,000.00

Tip: When a question says "will amount to," it means principal + interest. Use A = P(1 + RT/100) and divide. If you mistakenly treat D10,400 as the interest, you would get a wrong answer such as D34,666.67, which isn't among the options. You can also quickly test the options by plugging them back in, as in the check above.