Question

Frank borrowed money from a credit union for 3 years and was charged simple interest at an annual rate of 5%. The total interest that he paid was 750. How much money did he borrow?

Answer 1

$5000 is how much he borrowed or the "principle" amount.

Explanation:

The formula for simple interest is: I = p * r * t

where I = the interest charged, p = principle or amount borrowed, r = the annual rate charged (changed from a percent to decimal by dividing by 100) and t = time (must be expressed in year)

So, I = prt

750 = p * .05 * 3 (here, 3 * .05 = 0.15)

750 = 0.15p (now you need to solve for p by dividing both sides of the

0.15 0.15 equation by .15

5000 = p

So the amount borrowed is $5000