After 5 years, Mike's account earned \( \$ 1200 \) in interest. If the interest rate (in decimal form) is 0.06 , how much did Mike initially invest? Step 2 of 3 : Without substitution, solve the formula chosen in the previous step for the unknown variable in terms of the known variable(s).

To derive Mike's initial investment, we can use the formula for simple interest, which is \( I = P \times r \times t \). Here, \( I \) represents the interest earned, \( P \) is the principal (initial investment), \( r \) is the interest rate, and \( t \) is the time in years. Rearranging this for \( P \) gives us: \[ P = \frac{I}{r \times t} \] Now, we can plug in the values of \( I \), \( r \), and \( t \) later for calculation. Understanding simple interest is key—it’s a foundational concept used in loans, savings accounts, and investments. People rely on this formula for budgeting and forecasting their financial future. It lets you easily calculate how much you need to invest to meet your goals, keeping your financial planning sharp! If you’re diving into finance, books like “The Total Money Makeover” by Dave Ramsey can be a fantastic start. It breaks down concepts like interest, savings, and investments in a practical way. You’ll learn not just the maths but also the mindset needed to tackle investments smartly!