Owen’s grandmother put some money into his savings account on the day he was born. Today, Owen turns 18 years old, and he’s discovered that he has earned $225 in simple interest on his grandmother’s money. If the yearly interest rate was 5%, how much money did his grandmother deposit at the time of his birth?

Step-by-step explanation:

The formula for simple interest is prt = I, where p is the initial investment (our unknown in this case), r is the interest rate in decimal form, t is the time in years, and I is the interest earned. That is NOT the same as the amount of money in the account t years later.

For us,

p = ??,

r = .05,

t = 18, and

I = 225.

Filling in:

p(.05)(18) = 225 and

.9p = 225 so

p = 250

215.92 dollars is the answer