After taking out a one-year loan with an annual interest rate of 5 percent, Pranav pays $2,100 back to the bank. The principal of the loan was _______ and the interest payment was _______.
A) $2,000; $100
B) $2,100; $100
C) $100; $2,100
D) $100; $2,000

Question

Quizplus · Accepted Answer

The principal of the loan is the amount borrowed before interest. With a 5% annual interest rate, the interest payment would be 5% of the principal. If Pranav pays back $2,100, this includes both the principal and the interest. To find the principal, we can set up the equation: Principal + 0.05(Principal) = $2,100. Solving for the principal gives $2,000, and the interest is 5% of $2,000, which is $100.

After Taking Out a One-Year Loan with an Annual Interest