Question

Justin borrowed money from a credit union for 2 years and was charged simple interest at an annual rate of 7%. The total interest that he paid was $840. How much money did he borrow?

Answer 1

Justin borrow $6,000 from a credit union for 2 years.

What is Principal amount?

The amount of money initially borrowed from the lender, and as the loan is repaid, it can also refer to the amount of money still owed, is called Principal amount.

Given that;

Simple interest = $840

Time = 2 years

Annual rate = 7%

Now, The formula for calculate the principal amount is,

Simple interest = Principal amount × Rate × time / 100

Principal amount = Simple interest × 100 / Rate × time

Hence,

Principal amount = 840 × 100 / 7 × 2

Principal amount = 84,000 / 14

Principal amount = $6000

So, Justin borrow $6,000 from a credit union for 2 years.

Learn more about the principal amount visit:

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