Question

victor borrowed money at 5.25 percent simple annual interest. at the end of the year, the interest on the loan is $255.94. what was the amount of the loan?

$13.44
$134.37
$1,343.69
$4,875.05

Explanation:

Identify the given values

Using the Simple Interest Formula knowledge point

• Interest \(I = \$255.94\)
• Rate \(r = 5.25\% = 0.0525\)
• Time \(t = 1\) year

Set up the equation

Using the Simple Interest Formula knowledge point

$$ I = P \cdot r \cdot t $$

$$ 255.94 = P \cdot 0.0525 \cdot 1 $$

Solve for the principal

Using the Simple Interest Formula knowledge point

$$ P = \frac{255.94}{0.0525} $$

$$ P \approx 4875.0476 $$

$$ P \approx \$4,875.05 $$

Answer:

• (A) $13.44
• (B) $134.37
• (C) $1,343.69
• (D) $4,875.05 (Correct answer)