Question

Leo paid $2400 in interest on an amount borrowed for 10 years at a 4% annual simple interest rate. How much did Leo borrow?

Answer 1

Answer: $6000

Explanation:

1) Simple interest means that the interests are calcualted over the original amount borrowed and they are the same every year.

2) yearly interest = interest / number of years = $2400 / 10 = $240

3) the yearly interest equals the amount borrowed times the simple intereset rate:

=> $240 = A * 4%

=> $240 = A * 0.04

=> A = $240 / 0.04 = $6000

You can do the same in one step:

interest = A * simple interest rate * number of years

=>  A = interest / [simple interest rate * number of years] = $2400 / [4% * 10]

A = $2400 / (0.04 * 10) = $2400 / 0.4 = $ 6000.

And that is the answer: he borrowed $6000