Question

If Linda Wilson borrows $20,000 to buy a car and ends up paying the lender a total of $24,000, the $20,000 represents the:

a) Principal amount
b) Interest paid
c) Down payment
d) Total cost of the car

Answer 1

The $20,000 borrowed by Linda Wilson represents the principal amount of the loan. The remainder of the total paid to the lender is the interest on the loan.

Step-by-step explanation:

If Linda Wilson borrows $20,000 to buy a car and ends up paying the lender a total of $24,000, the $20,000 represents the principal amount. This is the initial sum of money borrowed and does not include the additional costs associated with the loan, such as the interest. The difference between what she paid in total ($24,000) and the principal amount ($20,000) is the interest paid ($4,000), which is the cost of borrowing money.