Customer Bank loaned The Teacup Shoppe money at 6% interest for 90 days. If the interest was $750 using the ordinary interest method, the principal amount borrowed was $5,000.

Question

Customer Bank loaned The Teacup Shoppe money at 6% interest for 90 days. If the interest ​was $750 using the ordinary interest method, the principal amount borrowed was $5,000.

Quizplus · Accepted Answer

Using the ordinary interest method (360-day year), the formula for interest is $I = P \times r \times t$, where $I$ is the interest earned, $P$ is the principal amount, $r$ is the annual interest rate, and $t$ is the time in years. Given $I = $750$, $r = 6\% = 0.06$, and $t = 90/360 = 0.25$ years, solving for $P$ gives $P = I / (r \times t) = $750 / (0.06 \times 0.25) = $50,000$.

Customer Bank Loaned the Teacup Shoppe Money at 6% Interest