SOLUTION: Sam is getting ready for a big date when he realizes that he has no money. His roommate, Bill, also has no money, but he has a credit card. Knowing that nobody will let Sam use B
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Question 1122561: Sam is getting ready for a big date when he realizes that he has no money. His roommate, Bill, also has no money, but he has a credit card. Knowing that nobody will let Sam use Bill’s credit card, Sam asks Bill to pull out a cash advance for $120.00. Bill agrees under the condition that Sam is responsible for all interest that accrues on the cash advance which is a 30% interest rate, compounded monthly. 5 full years go by before the $120 cash advance is repaid. How much should Bill ask Sam to pay in interest for the cash advance?
Answer by greenestamps(13200) (Show Source): You can put this solution on YOUR website!
The final amount A on a loan of P with a periodic interest rate r for n periods is
A = P(1+r)^n
The annual interest rate is 30%, so the periodic (monthly) interest rate is 2.5%, or 0.025. 5 years with a period of 1 month means 60 periods.
Plug in the numbers....
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