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Margaret's car loan statement said that she would pay $7,638.20 in interest for a 5-year loan at an interest rate of 9.8%. What was the original principal of the loan?

A) $5,000
B) $10,000
C) $15,000
D) $20,000

1 Answer

5 votes

The original principal of Margaret's car loan was $15,594.29.

To find the original principal of Margaret's car loan, we can use the simple interest formula:

Interest = Principal x Rate x Time

Given that the interest is $7,638.20, the rate is 9.8%, and the time is 5 years, we can rearrange the formula to solve for the principal:

Principal = Interest / (Rate x Time)

Principal = $7,638.20 / (0.098 x 5)

Principal = $7,638.20 / 0.49

Principal = $15,594.29

Therefore, the original principal of the loan was $15,594.29.

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