A student borrowed some money from his father at 2% simple interest to buy a car. If he paid his father $360 in interest after 3 years, how much did he borrow?
Okay Lucy this is the equation for simple interest:
P * R = I
P = principle or amount borrowed
R = rate of interest per term (which in this case appears to be annual)
I = Interest per term (which in this case appears to be annual)
Since it is simple interest the principle is constant.
So $360/3 years = $120 per year which is 2% of the principle per year
therefore from the equation we rearrange to get:
P = I/R
so P = $120/0.02 = $6000 (remember the decimal equivalent of the rate of interest)
each year he paid 2% of $6000 or a total amount of 6% of $6000 for a total of 0.06($6000) = $360
Now you want to know how much he borrowed which would be the principle of $6000.
Hope this helps!