Question

Manuel borrowed money from a credit union for 4 years and was charged simple interest at an annual rate of 7%. The total interest he paid was $1400. How much money did he borrow?

A) $4,000
B) $5,000
C) $6,000
D) $7,000

Answer 1

Manuel borrowed $5,000 from the credit union. This was calculated using the simple interest formula, showing that a total interest of $1400 over 4 years at a 7% interest rate corresponds to a principal of $5,000.

Step-by-step explanation:

The question asks us to find out how much money Manuel borrowed from a credit union if he was charged simple interest at an annual rate of 7% and the total interest he paid over 4 years was $1400. The formula for calculating simple interest is I = PRT, where I is the interest, P is the principal amount (the amount borrowed), R is the rate of interest per year, and T is the time in years.

To solve for the principal P, we can rearrange the formula to P = I / (RT). Plugging in the values, we have P = $1400 / (0.07 * 4). Performing the calculation, P equals $5,000, which means Manuel borrowed $5,000. Therefore, the correct answer is B) $5,000.