Item 16 Item 16 TMI Systems a company that customizes softwa

Item 16 Item 16 TMI Systems, a company that customizes software for construction cost estimates, repaid a loan obtained 3 years ago at 9% per year simple interest. If the amount that TMI repaid was $170,000, calculate the principal of the loan. The principal of the loan is $ _____.

Solution

lets assume interest paid every year will be r

Hence total interest paid over a period of 3 years will be 3r*P where P is Principle

then total amount paid after 3 years will be P+3rP

From given information we have

P+3rP=170000

r=0.09

P+3(0.09)P=170000

1.27P=170000

P=170000/1.27

P=$133858.26 and approximately 133,259...(Principle of Loan)