Question

Jamal has just finished paying off his personal loan. He made monthly payments of $46.25 for 12 months. If his loan had an 11% annual interest rate, what was the amount he borrowed?

Answer 1

$500

Explanation:

Given that :

Monthly payment made = $46.25

Period = 12 months

Total amount repaid = $(46.25 * 12) = $555

Hence, the entire amount paid back = $555

Interest rate = 11%

Using the simple interest relation:

A = P(1 + rt)

A = total amount repaid

r = interest rate

t = period

P = principal (amount borrowed)

555 = P(1 + (0.11*1))

555 = P(1 + 0.11)

555 = P(1.11)

555 = 1.11P

P = 555 / 1.11

P = $500

Amount borrowed = $500