Question

Determine the principle amount from a loan with $231 interest at an interest rate of 4% (0.04), that will be paid off in 3 years.

A. $1925
B. $17,325
C. $693
D. $19.25

Answer 1

The principal amount of the loan is $1925.

Step-by-step explanation:

To determine the principal amount of a loan, we can use the formula:

Principal = Interest / (Interest Rate * Time)

Given that the interest is $231, the interest rate is 4% (0.04), and the loan will be paid off in 3 years, we can substitute these values into the formula:

Principal = $231 / (0.04 * 3)

Calculating this, we find that the principal amount is $1925.