Dr. Collins borrowed some money to buy new furniture for her office. She paid $720.00 simple interest on a 7.5-year loan at 16%. Find the principal.
Wow, 16% when banks pay 2% p.a.?
7.5 years at 16% simple interest
= 7.5*16% in one year
= 120%
120% : $720
100% : X
By cross multiplying:
X=100%*$720/120%= $600.
To find the principal, we can use the formula for simple interest:
Simple Interest = (Principal * Rate * Time) / 100
Given that the interest paid is $720.00, the time is 7.5 years, and the rate is 16%, we can substitute these values into the formula:
720 = (Principal * 16 * 7.5) / 100
To solve for the principal, we can rearrange the formula:
Principal = (720 * 100) / (16 * 7.5)
Now, let's calculate the principal:
Principal = (720 * 100) / (16 * 7.5)
Principal = 72000 / 120
Principal = $600.00
Therefore, the principal borrowed by Dr. Collins is $600.00.