on for 6 years and was charged om borrowed money from a simple interest at an annual rate of 8%. The total interest that he paid was $336. How much money did he borrow? If necessary, refer to the list of financial formulas. $0 X
on for 6 years and was charged om borrowed money from a simple interest at an annual rate of 8%. The total interest that he paid was $336. How much money did he borrow? If necessary, refer to the list of financial formulas. $0 X
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![**Problem: Simple Interest Calculation**
Tom borrowed money from a credit union for 6 years and was charged simple interest at an annual rate of 8%. The total interest that he paid was $336. How much money did he borrow?
**Solution Steps:**
1. **Identify Variables:**
- Principal (P): The amount Tom borrowed (this is what we need to calculate).
- Rate (R): Annual interest rate = 8%.
- Time (T): Duration of the loan in years = 6 years.
- Interest (I): Total interest paid = $336.
2. **Simple Interest Formula:**
\[
I = P \times R \times T
\]
Where:
- \( I \) is the interest.
- \( P \) is the principal.
- \( R \) is the annual interest rate (as a decimal).
- \( T \) is the time the money is invested for in years.
3. **Convert the Interest Rate:**
\[
R = 8\% = 0.08
\]
4. **Substitute Values:**
\[
336 = P \times 0.08 \times 6
\]
5. **Calculate the Principal:**
\[
336 = P \times 0.48
\]
\[
P = \frac{336}{0.48} \approx 700
\]
Thus, Tom borrowed **$700**.
If necessary, refer to the [list of financial formulas](#) for additional information.
**Input Value:**
To confirm your solution, enter the borrowed amount:
\[
\boxed{\$700}
\]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae063e21-e069-49f8-ad73-1d555b7f1041%2F4a4fe0a2-4dbf-4f53-8079-476d6270c204%2Fle6weni_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Problem: Simple Interest Calculation**
Tom borrowed money from a credit union for 6 years and was charged simple interest at an annual rate of 8%. The total interest that he paid was $336. How much money did he borrow?
**Solution Steps:**
1. **Identify Variables:**
- Principal (P): The amount Tom borrowed (this is what we need to calculate).
- Rate (R): Annual interest rate = 8%.
- Time (T): Duration of the loan in years = 6 years.
- Interest (I): Total interest paid = $336.
2. **Simple Interest Formula:**
\[
I = P \times R \times T
\]
Where:
- \( I \) is the interest.
- \( P \) is the principal.
- \( R \) is the annual interest rate (as a decimal).
- \( T \) is the time the money is invested for in years.
3. **Convert the Interest Rate:**
\[
R = 8\% = 0.08
\]
4. **Substitute Values:**
\[
336 = P \times 0.08 \times 6
\]
5. **Calculate the Principal:**
\[
336 = P \times 0.48
\]
\[
P = \frac{336}{0.48} \approx 700
\]
Thus, Tom borrowed **$700**.
If necessary, refer to the [list of financial formulas](#) for additional information.
**Input Value:**
To confirm your solution, enter the borrowed amount:
\[
\boxed{\$700}
\]
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