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The total annual interest you owe on a loan is $7,800. If the interest rate is 11%, what is the principal amount?

a) $70,909.09
b) $63,636.36
c) $72,727.27
d) $65,454.54

User Keleshia
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1 Answer

6 votes

Final answer:

The principal amount of the loan is calculated using the formula: Principal = Interest / (rate × time). With an annual interest of $7,800 and an interest rate of 11%, the principal comes out to be $70,909.09.

Step-by-step explanation:

To find the principal amount of a loan when you know the total annual interest and the interest rate, you can use the formula Interest = Principal × rate × time. Since we know the annual interest ($7,800) and the interest rate (11%), and assuming the time applied here is 1 year, we can rearrange the formula to solve for the principal. This gives us Principal = Interest / (rate × time).

Let's plug in the numbers:

Principal = $7,800 / (0.11 × 1)

Principal = $7,800 / 0.11

Principal = $70,909.09

Therefore, the principal amount of the loan is $70,909.09, which corresponds to option a).

User Jtedit
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