Money is borrowed at 12%. After one year, $779.52 pays off the loan. How much was originally borrowed?

Question

This question is for my math class

Answer 1

Hello Ella

 

Let's set this up.

 

Recall

 

A = P(1+i)^t

where 

A=accumulated or future value = 779.52 = payoff figure

P = principal or amount borrowed

i = 12%, expressed as a decimal 0.12

t = time = 1 year

 

779.52 = P (1.12)¹

779.52/1.12 = P

P = 696

 

$696 was originally borrowed.