Question

elsa took out a 2-year loan to buy a car at a 6% simple interest rate. if she has to pay $264 in interest, how much principal did she borrow? $\square$

Explanation:

Step1: Recall simple interest formula

The simple interest formula is $I = P \times r \times t$, where $I$ = interest, $P$ = principal, $r$ = annual interest rate (decimal), $t$ = time in years.

Step2: Convert rate to decimal

$r = 6\% = \frac{6}{100} = 0.06$

Step3: Rearrange formula to solve for $P$

$P = \frac{I}{r \times t}$

Step4: Substitute given values

$I = 264$, $r = 0.06$, $t = 2$
$P = \frac{264}{0.06 \times 2} = \frac{264}{0.12}$

Step5: Calculate the principal

$P = 2200$

Answer:

$\$2200$