A bank account earns 4% annual simple interest. After 2 years, the account has $1,080. What was the original deposit?

Let P = original principal. Simple interest formula: A = P(1 + rt), where A is the final amount, r is the rate, t is the time. $1,080 = P(1 + 0.04 × 2) = P(1.08). Solve: P = $1,080/1.08 = $1,000. Verification: interest = $1,000 × 0.04 × 2 = $80; total = $1,000 + $80 = $1,080 ✓. This 'reverse' interest problem asks for the principal given the ending amount, rate, and time. Strategy: compute the total growth factor (1 + rt) = (1 + 0.08) = 1.08; divide the final amount by this factor to find the original. Same approach works for tax problems ('what was the pre-tax price if final price was $X?'), discount problems ('what was the original price if discount was X%?'), and compound interest problems (more complex factor). Always identify what you're solving for and set up the equation accordingly.