Question

Elsa took out a 2-year loan to buy a car at a 6% simple interest rate. If she has to pay $264 in interest;

How much interest did she pay each 1 year?

How much principal did she borrow?

Answer 1

P = I / rt is the formula we're going to use.

P is the principle (which is what we're solving for)

I = the interest accrued over the specified amount of time (2 years)

r = the interest rate (6%)

t = the time specified (2 years)

Change the percent to a decimal. Place the decimal two places to the left to make 0.06.

P = 264 / 0.06(2)

P = 264 ÷ 0.12 = 2,200

Principal borrowed would be $2,200