Question

Linda Davis agreed to lend money to Alex Luciano at a special interest rate of 9% per year, on the condition that he borrow enough that he would pay her $500 in interest over a three-year period:What was the minimum amount Alex could borrow?Alex can borrow a minimum of(Round to the nearest cent as needed)

Answer 1

The simple interest is given by:

`I=Prt`

where P is the principal, r is the interest rate in decimal form and t is the time.

In this case we know that:

The minimum interest Alex needs to pay is $500.

The interest rate is 0.09.

The time is three years, then t=3.

Plugging these values in the equation given and solving for P we have:

`\begin{gathered} 500=(0.09)(3)P \\ P=(500)/((0.09)(3)) \\ P=1851.85 \end{gathered}`

Therefore, the minimum amount Alex can borrow is $1,851.85