Question

Money is borrowed at 17% interest. After one year, $671.58 pays off the loan. How much was originally borrowed?

a) $500
b) $600
c) $700
d) $800

Answer 1

The original amount borrowed at a 17% interest rate to have a total repayment of $671.58 after one year is $600.

Step-by-step explanation:

To determine how much was originally borrowed when the total amount to pay off the loan after one year is $671.58 with an interest rate of 17%, we can use the formula for calculating the total repayment with simple interest:

Principal + (Principal × Interest Rate × Time) = Total Repayment

Let Principal be P, the Interest Rate be 0.17, Time be 1 year since it's a one-year loan, and Total Repayment be $671.58:

P + (P × 0.17 × 1) = $671.58

1.17P = $671.58

To find P, divide both sides of the equation by 1.17:

P = $671.58 / 1.17

P = $574

The closest answer to $574 is $600, which means the original amount borrowed was $600.