Question

ermaine’s father owes $6,300 in interest at the end of a 60-month car loan at a 7% simple annual interest rate. What was the original loan amount?

Answer 1

The pertinent formula is i = p*r*t.  Here, i = $6,300, r = 0.07 and t = 5 yrs.

We want to solve this for the principal, p.  Since i = p*r*t,  p = i / (rt).  In this case, the principal was:

p = $6,300 / [0.07*5] = $6,300 / 0.35 = $18,000