James B. answered • 06/05/17

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Since the loan is for 5 years, that is a total of 60 payments .... (12 monthly payments, for 5 years ... 5*12 = 60)

The total amount of money paid (including interest) = 60 * 276.25 = 16575

The formula for simple interest is I = Prt, where

I = interest

P = principal amount borrowed

r = interest rate (decimal) ... 4% = .04 as a decimal number

t = time, in years ... 5

Since the total amount paid back (16575) includes the principal and the interest,

Let "p" equal the principal amount borrowed

The interest expense for 5 years can be computed using ... I = Prt

I = Prt

I = p(.04)(5)

I = 0.2(p)

The amount repaid ... minus the interest charged ... equals the amount borrowed

16,575 - 0.2p = p

16,575 = p + .2p

16,575 = 1.2p

16,575/1.2 = 1.2p/1.2

$13,812.50 = p

The original amount borrowed is $13,812.50