Question

Ivan borrowed money from a credit union for 5 years and was charged at an annual rate 9% .The total interest that he paid was $2700.How much money did he borrow

Answer 1

The formula to calculate the total interest paid is:

`I=P((1+r)^n-1)`

Where:

• I, is the total interest paid

,

• P, is the amount borrowed

,

• r, is the interest rate

,

• n, is the times that the interest was compounded

Solving this formula for P,

`\begin{gathered} I=P((1+r)^n-1) \\ \\ \Rightarrow P=(I)/((1+r)^n-1) \end{gathered}`

Using the data given,

`\begin{gathered} P=(2700)/((1+(9)/(100))^5-1) \\ \\ \Rightarrow P=5012.77 \end{gathered}`

Therefore, we can conclude that he borrowed $5,012.77