Question

Kira took out a loan for 7 months and was charged simple interest at an annual rate of 7.2%. The total interest she paid on the loan was $231. How much money did Kira borrow?

Answer 1

By using the simple interest formula I = PRT and rearranging it to find the principal, we calculated that Kira borrowed $5,500 on her loan.

Step-by-step explanation:

To find out how much money Kira borrowed, we need to use the formula for calculating simple interest: I = PRT, where 'I' is the interest, 'P' is the principal amount (the amount borrowed), 'R' is the annual interest rate in decimal form, and 'T' is the time the money is borrowed for, in years. Kira paid a total interest of $231 for a loan at an annual simple interest rate of 7.2% over 7 months (which is 7/12 years).

Using the formula:

I = P × R × T

$231 = P × 0.072 × (7/12)

To find the principal (P), we rearrange the formula:

P = $231 / (0.072 × 7/12)

Calculating this gives us:

P = $231 / 0.042

P = $5,500

Kira borrowed $5,500.