Question

Your company took a start up loan at 5% interest. You also took a capital improvement loan for 7% interest. The start up loan is eight times larger than the improvement loan. If the interest paid on both loans for one year is $9,400, how much did the company borrow for each loan?

Answer 1

To answer the question above, we let 8x be the amount loaned with 5% interest and x be the amount loaned at 7% interest. The amount of interest is calculated through the equation,
                                     I = amount x rate 
The sum of these interest should be 9,400. The equations that would best represent the given scenario are,
              (8x)(0.05) + x(0.07) = 9400
The value of x from the given equation is,
                              x = 20,000
Therefore, the company loaned $160,000 with 5% interest and $20,000 with 7% interest.