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? If necessary, refer to the list of financial formulas. $0 X S ?
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? If necessary, refer to the list of financial formulas. $0 X S ?
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
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Question
![**Problem: Calculating Principal Borrowed with Simple Interest**
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:**
To find the amount of money Tom borrowed, we can use the simple interest formula:
\[ I = P \times r \times t \]
Where:
- \( I \) is the interest paid ($336).
- \( P \) is the principal amount (the amount borrowed).
- \( r \) is the annual interest rate (8% or 0.08).
- \( t \) is the time the money is borrowed for (6 years).
Solving for \( P \):
\[ P = \frac{I}{r \times t} \]
Substitute the known values:
\[ P = \frac{336}{0.08 \times 6} \]
\[ P = \frac{336}{0.48} \]
\[ P = 700 \]
So, Tom borrowed $700.
**Interactive Elements:**
- Input Box for Answer: Enter the calculated principal amount.
- Buttons:
- "X" to clear entry.
- "↻" to reset the question.
- "?" for hints or guidance.
**Additional Resource:**
- A link to a [list of financial formulas](#) is provided for reference.
Use the information above to understand and solve similar problems related to simple interest calculations.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fae063e21-e069-49f8-ad73-1d555b7f1041%2F62558b68-70a6-4f08-8745-81c3889dd70c%2Fxyy51j_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Problem: Calculating Principal Borrowed with Simple Interest**
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:**
To find the amount of money Tom borrowed, we can use the simple interest formula:
\[ I = P \times r \times t \]
Where:
- \( I \) is the interest paid ($336).
- \( P \) is the principal amount (the amount borrowed).
- \( r \) is the annual interest rate (8% or 0.08).
- \( t \) is the time the money is borrowed for (6 years).
Solving for \( P \):
\[ P = \frac{I}{r \times t} \]
Substitute the known values:
\[ P = \frac{336}{0.08 \times 6} \]
\[ P = \frac{336}{0.48} \]
\[ P = 700 \]
So, Tom borrowed $700.
**Interactive Elements:**
- Input Box for Answer: Enter the calculated principal amount.
- Buttons:
- "X" to clear entry.
- "↻" to reset the question.
- "?" for hints or guidance.
**Additional Resource:**
- A link to a [list of financial formulas](#) is provided for reference.
Use the information above to understand and solve similar problems related to simple interest calculations.
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