Question

Ivan borrowed money from a credit union for 5 years and was charged at an annual rate 9% .The total interest that he paid was $2700.How much money did he borrow

Answer 1

The formula to calculate the total interest paid is:

$I=P((1+r)^n-1)$

Where:

• I, is the total interest paid

,

• P, is the amount borrowed

,

• r, is the interest rate

,

• n, is the times that the interest was compounded

Solving this formula for P,

$\begin{gathered} I=P((1+r)^n-1) \\ \\ \Rightarrow P=\frac{I}{(1+r)^n-1} \end{gathered}$

Using the data given,

$\begin{gathered} P=\frac{2700}{(1+\frac{9}{100})^5-1} \\ \\ \Rightarrow P=5012.77 \end{gathered}$

Therefore, we can conclude that he borrowed $5,012.77