SOLUTION: ou borrow $9000 to help pay your college expenses. You agree to repay the loan at the end of 7 years at 8% interest, compounded quarterly. (Round your answers to two decimal places

Question 1134098: ou borrow $9000 to help pay your college expenses. You agree to repay the loan at the end of 7 years at 8% interest, compounded quarterly. (Round your answers to two decimal places.)
(a) What is the maturity value of the loan?
$
(b) How much interest are you paying on the loan?
$
Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
loan is 9,000.
loan to be paid off at the end of 7 yers at 8% interest per year compounded quarterly.

formula is f = p * (1 + r) ^ n

f is the future value
p is the present value
r is the interest rate per time period
n is the number of time periods.

time period is quarters.
there are 4 quarters per year.

interest rate per quarter = 8% per year / 100 = .08 per year / 4 = .02 per quarter.

number of quarters = 7 years * 4 = 28 quarters.

since p = 9,000, formula becomes f = 9,000 * (1 + .02) ^ 28.

solve for f to get f = 15,669.21786 = 15,669.22 rounded to two decimal places.

that's the maturity value of the loan.

the interest paid is f - p = 15,669.21786 minus 9,000 = 6,669.21786 = 6,669.22 rounded to two decimal places.
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