Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th birthday. How much does Rita need to put in the bank now if the interest rate on her account is 12% per year?

She should invest 6976.74 $ principal on daughter's 12th birthday.

Explanation:

We have I = prt, where I represents simple interest, p represents principal, r represents interest rate, and t represents time in years.

Here p + I = 12,000 $

So, I = 12000-p

Interest rate r = 12% = 0.12

Number of years = 18 - 12 = 6 years.

Substituting

12000-p = p x 0.12 x 6

p + 0.72 p = 12000

1.72 p = 12000

p = 6976.74 $

So, she should invest 6976.74 $ principal on daughter's 12th birthday.