Final answer:
The principal in Amy's loan transaction is $1000, and she paid $550 in interest, for a total repayment of $1550.
Step-by-step explanation:
Amy received a $1000 loan from the bank and repaid $1550. To determine the principal and interest amounts in this transaction, we subtract the original loan amount (principal) from the total amount repaid. The principal is the amount that was originally borrowed, which is $1000 in this case.
The interest in this situation is the extra money paid in addition to the principal to compensate the lender for the risk of the loan and for foregoing other uses of the funds. To calculate the interest, we use the following formula: Interest = Total Repayment - Principal.
Applying the formula, the interest Amy paid is calculated as follows:
Interest = $1550 - $1000 = $550.
Thus, the principal amount is $1000, and the interest paid on the loan is $550.