Question

Jane took out a loan for college with and interest rate of 5.75%. She does not have to make payments on the loan until she graduates in four years. After four years, the loan has increased $11960 in interest. Find the original amount of the loan.

Answer 1

Answer: the original amount of the loan is $52000

Explanation:

Let P represent the original amount of the loan. We would apply the formula for determining simple interest. It is expressed as

I = PRT/100

Where

P represents the principal or the original amount of the loan.

R represents interest rate.

T represents the duration for which the loan was given in years

I represents the interest.

From the information given,

R = 5.75%

T = 4 year

After four years, the loan has increased $11960 in interest. This means that

I = 11960

Therefore,

11960 = (P × 5.75 × 4)/100

11960 = 23P/100 = 0.23P

P = 11960/0.23

P = 52000