Learn Before
Example

Solving a Word Problem for the Principal of Eduardo's Car Loan

Apply the problem-solving strategy to find the principal given the simple interest earned, rate of interest, and time.

Problem: Eduardo noticed that his new car loan papers stated that with a 7.5% simple interest rate, he would pay $6{,}596.25 in interest over 55 years. How much did he borrow to pay for his car?

  1. Read the problem carefully.
  2. Identify what to find: the amount borrowed (the principal).
  3. Name the unknown: Let PP = principal borrowed.
  4. Translate into an equation using the simple interest formula I=PrtI = Prt. Given I=6,596.25I = 6{,}596.25, r=0.075r = 0.075, and t=5t = 5: 6,596.25=P(0.075)(5)6{,}596.25 = P(0.075)(5)
  5. Solve the equation: Multiply 0.075 and 55: 6,596.25=0.375P6{,}596.25 = 0.375P Divide both sides by 0.375: 17,590=P17{,}590 = P
  6. Check the result: I=PrtI = Prt 6{,}596.25 stackrel{?}{=} (17{,}590)(0.075)(5) 6{,}596.25 = 6{,}596.25 checkmark
  7. Answer: The principal was $17{,}590.

0

1

Updated 2026-06-03

Contributors are:

Who are from:

Tags

OpenStax

Intermediate Algebra @ OpenStax

Ch.2 Solving Linear Equations - Intermediate Algebra @ OpenStax

Algebra