In order to restructure some of its debt General Motors deci

In order to restructure some of its debt, General Motors decided to pay off one of its short-term loans. If the company borrowed the money 1 year ago at an interest rate of 8% per year and the total cost of repaying the loan was $82 million, what was the amount of the original loan?

Solution

Let amount of original loan be P.

Then,

P + P x r = $82 billion

P + P x 0.08 = $82 million

P x (1 + 0.08) = $82 million

P x 1.08 = $82 million

P = $82 million / 1.08 = $82,000,000 / 1.08 = $75,925,925.93