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The principal amount if the interest rate is 3.5% a year is equal to $3000.

Given the following data:

  • Interest rate = 3.5%
  • Simple interest = $183.75
  • Time = 21 months

Conversion:

12 months = 1 year

21 months = 1.75 year

To calculate the principal amount if the interest rate is 3.5% a year:

Mathematically, simple interest is given by the formula:

[tex]S.I = \frac{PRT}{100}[/tex]

Where:

  • S.I is the simple interest.
  • P is the principal amount.
  • R is the interest rate.
  • T is the time measured in years.

Making P the subject of formula, we have:

[tex]P = \frac{100S.I}{RT}[/tex]

Substituting the given parameters into the formula, we have;

[tex]P = \frac{100 \times 183.75}{3.5 \times 1.75}\\\\P = \frac{18375}{6.125}[/tex]

Principal amount, P = $3000

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