Joe borrowed money from a credit union for 2 years and was charged simple interest at an annual rate of 7%. The total interest that he paid was $980. How much money did he borrow?
Question
Joe borrowed money from a credit union for 2 years and was charged simple interest at an annual rate of 7%. The total interest that he paid was $980. How much money did he borrow?
Solution
To solve this problem, we need to use the formula for simple interest which is I = PRT, where I is the interest, P is the principal amount (the amount of money borrowed), R is the rate of interest, and T is the time.
From the problem, we know that: I = $980 R = 7% = 0.07 (as a decimal) T = 2 years
We need to find P.
Substituting the known values into the formula, we get:
980 = P * 0.07 * 2
To solve for P, we divide both sides of the equation by (0.07 * 2):
P = 980 / (0.07 * 2)
P = 980 / 0.14
P = $7000
So, Joe borrowed $7000 from the credit union.
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