SOLUTION: To pay the tuition for medical school, Melissa borrowed $8400 in student loans her first year. The loan is for seven years at an annual interest rate of 3.4% with interest compoun

Question 447438: To pay the tuition for medical school, Melissa borrowed $8400 in student loans her first year. The loan is for seven years at an annual interest rate of 3.4% with interest compounded semiannually. What will be the amount of principal and interest in seven years?
Answer by lwsshak3(11628) (Show Source): You can put this solution on YOUR website!
To pay the tuition for medical school, Melissa borrowed $8400 in student loans her first year. The loan is for seven years at an annual interest rate of 3.4% with interest compounded semiannually. What will be the amount of principal and interest in seven years.
..
You can use the compound interest formula for this kind of problem as follows:
A=P(1+r)^n, P=initial amount invested or borrowed in this case, r=interest rate per period, n=number of periods, and A=the amount after n periods. The difference between A and P is the amount of interest after n periods.
..
For given problem:
P=$8400
r=.034/2=.017 (annual interest rate/2)
n=14 (number of compounding periods in 7 years)
..
A=8400(1+.017)^14
=8400(1.017)^14
=$10635.86
Interest=A-P=10635.86-8400=$2235.86
ans:
In seven years the principal and interest will be $10635.86 and $2235.86, respectively.
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