Question

sam was charged $1,050 in interest on a loan with a 2.5% interest rate. What was the original amount of the loan it he took 5 years to pay it back?

Answer 1

Answer:

$8,400

Explanation:

The interest can be calculated using the following equation:

$I=\text{P}\cdot r\cdot t$

Where P is the original amount of the loan, r is the interest rate, and t is the time that the person tool to pay it back.

So, we can replace I by $1,050, r by 2.5% or 0.025, and t by 5 years. Then:

$1050=P\cdot0.025\cdot5^{}$

Finally, we can solve for P as:

$\begin{gathered} 1050=P\cdot0.125 \\ \frac{1050}{0.125}=\frac{P\cdot0.125}{0.125} \\ 8400=P \end{gathered}$

Therefore, the original amount of the loan was $8,400