SOLUTION: Margo borrows $100, agreeing to pay it back with 6% annual interest after 13 months. How much interest will she pay? Round your answer to the nearest cent, if necessary.

Question 858599: Margo borrows $100, agreeing to pay it back with 6% annual interest after 13 months. How much interest will she pay?
Round your answer to the nearest cent, if necessary.
Answer by JulietG(1812) (Show Source): You can put this solution on YOUR website!
100 * .06 = $6 interest per year
If it's compounded ANNUALLY, she'll owe $106 at the end of 12 months.
Since she is contracting to pay it back in 13 months, it will be compounded again at the end of the 13th month.
$106 * .005 (1/12th of the 6% interest) = .53
Total to pay back: 106.53
Amount of interest: 6.53
.
If, however, she is paying it back with interest calculated at the end of the 13 months instead of annually, she'll pay:
100 * 6.5 (6% interest + % interest)
Total to pay back: 106.50
Amount of interest: 6.50

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