Question

elsa took out a 2 year loan to buy a car at a 6% simple interest rate. if she has to pay 264 in interest how much principal did she borrow

Answer 1

p = ----------- = $4,400

Explanation:

The formula for simple interest is i = prt, where r is the interest rate expressed as a decimal fraction.

We want to calculate the principal. Solving the above formula for p, we get:

i

p = -------

rt

So if r = 0.06, t = 1 yr and i = $264, the principal in this particular case is

$264

p = ----------- = $4,400

0.06(1)